BBC On The Record - Broadcast: 17.02.02

Film: FILM ON GARBAGEGATE%3A Iain Watson looks at the row over Tony Blair's letter to the Romanian Government in support of a foreign business.

TONY BLAIR: This is a complete load of nonsense from beginning to end. It's not Watergate, it's Garbagegate. IAIN WATSON: The Prime Minister wanted to rubbish allegations that he was giving support to the Indian billionaire Lakshmi Mittal just because he was a Labour donor; but with confirmation today of yet more indirect British help for his company, it won't be easy for the government to dispel the stench of sleaze. FAZ HAKIM: The system leads to a situation where you are raising money on the one hand, and making decisions about those companies on the other hand and the two just don't go together very well. HENRY DRUCKER: Those who want to buy influence are those who need to buy influence. Very often, they are companies who are primarily foreign companies, but who are beginning to do business in the United Kingdom and want access to British ministers. WATSON: To have one brouhaha over business links could be considered a misfortune. To have several begins to look careless. A pattern seems to be emerging - Labour is accused of impropriety, they mount a robust defence, then it emerges they haven't exactly been telling the whole story. Even when they've been doing absolutely nothing wrong, the perception can be as damaging as the reality. So now some supporters are saying it's time that Labour changed the whole system of party funding, while opponents say there are more immediate questions to be answered over the Mittal affair. so it seems Tony Blair still has some way to go before he consigns Garbagegate to the dustbin of history. Last July, the Prime Minister wrote a letter to his Romanian counterpart welcoming the imminent purchase of the country's Sidex steelworks by this man's company LNM. Lakshmi Mittal had given one-hundred-and-twenty-five thousand pounds to Labour just weeks before. Tony Blair said he was unaware of the donation, but the original defence - he was simply standing up for British business - unravelled when it was revealed that LNM was largely based overseas and employs fewer than zero-point-one per cent of their staff in the UK. TIM COLLINS MP: If the Prime Minister wants us to believe his version of events he should publish all the briefing papers he saw when he was invited to sign this letter. He should publish the full details of all conversations relating to his Chief of Staff, he should make it clear that he is agreeable now to a proper enquiry, to get to the root of all this, he should stop just assuming that all he has to do is say I'm a pretty straight forward kind of guy, and we'll take his word for it. WATSON: The political heat continues to be turned on Labour. Today it emerged that officials at the international development department supported an application for a seventy million pound loan for Lakshmi Mittal's company, LNM, to buy this Romanian steelworks. And late last week, it was revealed that Tony Blair had met Mr Mittal at a fundraiser's party just weeks before writing his letter to Romania. And that the financial link to Mr Mittal was forged back when Tony Blair's Chief of Staff, Jonathan Powell, had been the party's main fundraiser in opposition. COLLINS: I think the government now must make it clear - what did the Prime Minister know and when did he know it? What exactly was the role of his Chief of Staff? How is it defensible to have someone who used to raise money for the Labour Party, deciding what papers and what people see the Prime Minister? How can it possibly be right for a British ambassador to be acting as though he was almost an agent for an Indian businessman, whose British business interests are almost negligible? This is deeply worrying. WATSON: Labour's glitzy fundraising parties take place in the glare of publicity; but one of the party's former financial consultants believes aspects of the Mittal donation have yet to come to light. DRUCKER: Well I think one of the most interesting aspects of this affair and certainly if I were involved, questions I would want answers to is who asked Mittal for money? What did he ask him for and what did Mittal want in return? I haven't heard any of these things explored. WATSON: Bernie Ecclestone, the diminutive motor racing tycoon, was involved in one of the Labour government's earliest problems of perception. Only when Tony Blair backed exempting Formula One from a proposed European ban on tobacco advertising, did it emerge that he'd given a million pounds to the Labour Party; the cash had to be handed back HAKIM: We clearly should have, you know, just come clean about the whole thing straight away. You know, in, in retrospect there wasn't anything to hide, and, you know, once we did come clean it was end of story really. But we definitely needed to think through perceptions. WATSON: But it wasn't just the Ecclestone affair. In 1997, it was revealed that the trade minister, Lord Simon, still held BP shares worth two-million pounds. While this wasn't illegal, some rotten publicity persuaded him to dispose of them. More recently, the wealthy Hinduja family donated one-million pounds to the Millennium Dome. Quite coincidentally, SP Hinduja received a British passport in about a third of the usual time. The US energy corporation Enron donated thirty-six-thousand pounds to Labour, and the moratorium on gas-fired power stations was lifted; while no connection's been proven, the opposition have thrown plenty of dirt around. Last week, further embarrassment for the government when the former minister for Europe, Keith Vaz, was thrown out of the House of Commons for a month for trying to frustrate an investigation into his financial affairs. And now a former fundraising consultant for Labour believes 'cash for access' is at least the expectation of some who throw their spare dosh the government's way. DRUCKER: You don't have to pay money to get to see a politician, but there is the impression, which is so strong that there's got to be something in it, that your comments, your suggestions, your queries are paid more attention to, if you are a useful donor to either party, the party of government, than if not. WATSON: The question the government is pondering is how to avoid future accusations or insinuations over 'cash for access.' Downing Street say the Prime Minister is relaxed about a debate over state funding but doesn't yet believe there's a consensus amongst the public for it. That's code for saying it's politically risky. But some of his former advisers believe there's no other only realistic option. JAMES PURNELL MP: I think it was important in run up to the ninety-seven election that the party could raise money from business as well as from trade unions. It was one of the things which showed that the party had changed, but the situation has now arisen where the party gets criticised for raising money from the trade unions, the RMT, from Enron and from private individuals and, given all of that, it's quite difficult to see who we'll raise money from in the future without being criticised, and I think that's why the case for looking at state funding of political parties is now quite strong. HAKIM: I think there will be some problems in terms of getting the public to accept state funding and funding of political parties, but the alternative is to keep having these stories coming out again and again and again. WATSON: State funding may be some way off, but an influential Labour MP says the government can quickly and easily distance themselves from the perception that rich business people can buy access or influence. TONY WRIGHT MP: We should have decided there should be a cap on individual donations. We could discuss the amount, I think probably something like ten thousand pounds a year would do it. You could do that immediately. It would need the slightest amendment, to the party funding legislation that we already have brought in, and I think that would take care of any suggestion that you had donations of amount, of an amount that could possibly influence policy. WATSON: Tony Blair said he wouldn't shirk tough choices, but if he chooses to tough out the Mittal affair and casts aside a wider reform of political funding, he could find his troubles piling up in the future.
NB. This transcript was typed from a transcription unit recording and not copied from an original script. Because of the possibility of mis-hearing and the difficulty, in some cases, of identifying individual speakers, the BBC cannot vouch for its accuracy.