Labour's reputation lost in a moment

Reputations take a long time to win but just a moment to lose and, after just six months in power, Labour wasted its credibility this week as allegations of political sleaze and dubious donations piled up.

Labour has soiled its squeaky-clean image. The howls of self-righteous indignation with which Labour greeted Tory problems over the years are now somewhat muted.

It began when the Government, which in opposition had said it would ban all tobacco sponsorship of sport - even if that meant Formula One motor racing had to leave Britain - performed a policy U-turn.

The minister chosen to make the announcement that tobacco sponsorship could stay was Tessa Jowell, the Junior Health Minister. The problem is that Ms Jowell's husband, a lawyer, works for Benetton's Formula One team. She wriggled as her critics bayed for blood and claimed the decision had nothing to do with him.

But then came the news that one of Labour's biggest benefactors - a man invited to 10 Downing Street one evening just a few weeks ago - was Bernie Ecclestone, vice-president of the International Automobile Federation, in other words the boss of Formula One.

It turns out Mr Ecclestone, a former contributor - like so many Hong Kong figures - to Conservative Party funds, gave Labour GBP1 million (HK$12.6 million) just before the election, the biggest donation ever made by an individual to the party's coffers.

As the press smelled a rat when Labour went back on its tobacco-sponsorship pledge, so party chiefs quickly sought the advice of the parliamentary standards watchdog, Sir Patrick Neill. He suggested the party should give the money back and (no doubt with many a tearful eye) it did so. Nonetheless it took a full three days of media pressure for Labour to admit the size of the cash gift.

The suspicion is that Mr Ecclestone's generosity may just have swayed government policy on tobacco sponsorship. The Government, not surprisingly, says that is nonsense, that banning cars with tobacco sponsorship from taking part in races in Britain would have cost 50,000 jobs and driven out of the country an industry in which Britain is a world-beater.

It would be better, claimed the Government, if the European Union banned tobacco sponsorship in sport; unilateral action would be ineffective. But EU action is unlikely. If tobacco support is stubbed out, Formula One will happily search out new Grand Prix venues in Asia.

There is no easy solution to the question of party contributions. Tony Blair used the episode to announce a full inquiry into party funding. The Government will also introduce legislation next year requiring any donor of more than GBP5,000 to a party to be named, and outlawing gifts from abroad such as the hundreds of thousands of pounds that poured into the Tory account from Hong Kong over the years.

Labour chiefs say they want to 'open up a debate' and perhaps even adopt the Italian model of state funding.

But how could a government that has little enough money to run hospitals and that has just - again contrary to a manifesto pledge - introduced new tuition fees for students, then go and hand out millions of pounds to each of the three main political parties? Letting politicians put their hands into the public purse to aid their own parties would be deeply unpopular. If they received revenue from the taxpayer, what incentive would there be for a party to pursue mass membership? Maybe the only answer is to impose a strict regime whereby big donors are named and the size of their gifts made public. If there is a case for really open politics, this must be it.