The Mandelson loan: Mandelson facing censure from official watchdog over `sleaze'

THE CRISIS engulfing Peter Mandelson, the Secretary of State for Trade and Industry, over his pounds 373,000 personal loan from Geoffrey Robinson deepened last night as he faced new allegations that he had broken the rules governing the conduct of ministers and MPs.

Mr Mandelson is facing censure from Parliament's anti-sleaze regulator for not disclosing the loan, which helped him buy a pounds 475,000 house in Notting Hill, west London, in the MPs' register of interests.

Meanwhile, the Tories claimed that Mr Mandelson had breached the code of conduct for ministers by not consulting civil servants and the Prime Minister over the financial aid.

In a bid to pre-empt censure, Mr Mandelson yesterday wrote to Elizabeth Filkin, the new Parliamentary Commissioner for Standards, setting out the details of his agreement with Mr Robinson, the Paymaster-General.

Last night, Labour MPs and ministers were dismayed by the affair. Many fear that it will tarnish Tony Blair's image because Mr Mandelson is one of his closest allies, and they are furious the Prime Minister was not told about the 1996 loan until last week, when Mr Mandelson became aware that the circumstances of his house purchase were about to be made public.

As well as provoking allegations of "sleaze" and "cronyism" at the heart of the Government, the crisis also threatens to reopen the long-running feud between Mr Mandelson and Gordon Brown, the Chancellor. Yesterday, their two camps angrily accused each other of leaking details of the loan.

Despite Tory demands for Mr Mandelson to be sacked, the Prime Minister is standing by him. The controversy also makes it less likely that Mr Robinson will resign as Paymaster-General over the Christmas period. His resignation had been widely expected after a string of revelations about his business activities. Mr Robinson has assured Downing Street he does not have any other loan arrangements with Labour MPs.

Although Mr Mandelson insisted he had done nothing wrong, senior Commons sources told The Independent that a low-interest loan could certainly be regarded as a financial interest which should be declared in the MPs' register.

Ms Filkin will investigate the Mandelson case when she succeeds Sir Gordon Downey in February. Two years ago, Sir Gordon upheld a similar complaint against a Conservative MP, Roy Thomason, whose creditors were urged not to call in his loans when he was in financial trouble.

Sir Gordon ruled that Mr Thomason should have registered the preferential treatment he received and said guidance to MPs should be altered to reflect his finding. It has been estimated that the cheap loan given to Mr Mandelson by Mr Robinson has saved him about pounds 10,000 over two years.

In a letter to Mr Blair last night, the Tory leader, William Hague, said the loan also represented a clear breach of the ministerial code of conduct, which says no minister should accept a gift or service that might appear to place him under an obligation. The code says any minister in doubt should consult the Prime Minister, but in the first instance he should talk to his permanent secretary.

Mr Mandelson did not inform either his most senior official or the Prime Minister of the loan until last week.

Mr Hague urged Mr Blair to act, to show that the code was "worth the paper it is written on". "Are you prepared to take the tough action needed to restore public confidence in the way your government conducts itself?" he asked.

In his letter to Ms Filkin last night, Mr Mandelson said the loan did not have to be registered "as it was not a gift or gained through my being an MP". However, he asked her to rule on whether he should have disclosed it, "given the substantial media interest".

His allies insisted that he had not broken the ministerial rules, saying he did not need to consult officials or the Prime Minister because he was sure there was no conflict of interest.

Rhodri Morgan, chairman of the Commons Public Administration Select Committee, said that while "technically" there had been no offence, many Labour voters would be unhappy at what had happened. "I think it just leaves people with the impression of, `well, we thought that by voting Labour and having a Labour government we got away from this kind of thing'," he said.