Analysis: Job for City high-flier reignites debate over finances

The new row surrounding City whiz kid Arnab Banerji is just the latest in a long line of party donor controversies that are persuading Labour bosses to back state funding of politics.

Senior Labour sources have revealed they want legislation for state funding of parties to be pushed through before the next general election.

After months of stories about Lakshmi Mittal, Richard Desmond, Gulam Noon and others, Millbank is urging Tony Blair to take radical action even if the Conservatives do not back the idea. Sources claim senior Tories have given private backing but if Iain Duncan Smith blocks reform, then Labour could join the Liberal Democrats to force a law through the Lords.

The party's embarrassment was underlined yesterday when it was revealed that its chief fundraiser, Lord Levy, tried to "tap" Charles Dunstone, the Carphone Warehouse founder, for £1m at a party.

Unlike Mr Mittal, who gave cash months before the Prime Minister backed his bid for a Romanian steel plant, or Mr Noon, who was given an honour, Dr Banerji tends to shun the media limelight.

The Oxford-educated financial expert, born in India, was joint head of emerging markets at Citibank Global Asset Management, then joined F&C Management in 1993.

When the Prime Minister announced members of his new Forward Strategy Unit last October, Dr Banerji's name tended to be overlooked as attention focused on Lord Birt, the former BBC director general, and Adair Turner, the former CBI head.

Lord Birt's plans for toll "supermotorways" received high exposure, as did Mr Turner's criticism of the Government's plans to restructure the NHS. The two other members of the unit, Penny Hughes, the former president of Coca-Cola in the UK, and Nick Lovegrove, a partner at the management consultants McKinsey, were also better known.

But as the chief investment officer at F&C Management, Dr Banerji is well regarded in the City as one of the best brains of his generation.

F&C has more than £65bn under management and many of its trusts – including F&C Investment Trust, which dates back to 1868 – are quoted on the stock market.

His closeness to Downing Street was known to some, but it was a shock when he resigned. Robert Jenkins, chief executive of F&C, said last week: "Regrettably, Arnab is leaving the company to take up a position in the public sector."

Controversial donors

Lakshmi Mittal
Indian billionaire whose bid for the privatised Romanian steel industry caused headaches when it emerged Tony Blair had intervened to back him. The identity of the Downing Street aide who described Mr Mittal as a "friend" of the Prime Minister remains unknown.

Richard Desmond
The owner of Express Newspapers triggered outrage among Labour MPs after the party admitted that it had received more than £100,000 from him. Described by critics as a "porn baron", his gift led Labour to set up a new vetting panel to scrutinise donations.

Gulam Noon
Millionaire Indian foods entrepreneur who donated more than £100,000 was given a knighthood in the golden jubilee honours list. Sir Gulam, whose company, Noon Products – now part of WT Foods Group – employs hundreds of people, said: "It has absolutely nothing to do with my knighthood."

Bernie Ecclestone
The Formula One chief's gift of £1m in 1997 was sent back after Labour was embarrassed by revelations that it had argued for an exemption for motor racing from a European advertising ban on tobacco. Mr Blair and Stephen Byers have also accelerated a by-pass for Silverstone.