"People should be paid a fair rate"

Peter Mandelson -Payment on result

"Fat Cat" Row Over Millennium Consultant

Peter Mandleson, who is in charge of Millennium planning, said that the deal had come after some "very hard bargaining". He said that Mr McCormack's firm would have to earn its money. "Let me make it absolutely clear that they will only be paid for results, not a penny in the meantime."

Government sources said the deal was done for significantly less than the normal market rate for such work of around 10%-15%.

The Opposition has accused Labour of double standards for being prepared to pay millions to consultants for organising Millennium celebration sponsorship while criticising private sector "fat cats."

Shadow National Heritage spokesman Francis Maude told BBC Radio 4's Today programme: "No doubt they have got the best terms. But what I am worried about is the consistent vilification by the Labour Party of anyone they think is getting more money than is justified."

Maude: "This is hypocrisy"

Mr Maude said the Millennium contract "does seem an enormous amount, but the point is this is hypocrisy". But Mr Mandelson accused him of using "patronising claptrap" in criticising policies first conceived by the Conservative government.

"It is true that we are going to use Mark McCormack Associates under an agreement made under the previous government," admitted Peter Mandelson, Minister without Portfolio in charge of the Millennium project.

"We are talking about very big sums of money. We need private sector sponsorship, it is not money that grows on trees," Mr Mandelson explained. "You need professional money-raisers. They will be paid on the basis of results. In the meantime, they will be carrying their own costs. We are now going to proceed."

Row over finance intensifies

Mr Mandelson said Labour had decided to continue with Conservative plans for the Millennium by taking on the deal with Mark McCormack Associates because they "have a proven track record at their job".

"I am not going to go to amateurs and blunderers," Mr Mandelson said. He then dismissed Mr Maude's accusations of hypocrisy, declaring: "We do believe people should be paid a fair market rate on the basis of performance. The point we have made previously about so-called fat cats is that they have received vast remuneration when it is not justified."

Labour MP Tam Dalyell has added his voice to criticism of the deal, describing the idea of a multi-million commission as "lousy."

"Why should people give money if they think a large chunk is going to Mr McCormack's well-heeled organisation?" asked Mr Dalyell. "If you or I were asked for money, we might give it for the reconstruction of Greenwich.... we might give it to hospitals, we might give it to schools, but why should we give it to Mr McCormack's outfit?"

Mr Dalyell said his concerns were shared by a number of colleagues.