Focus: Flat Denial

'It is not true that Peter Foster was or is a financial adviser to the family.' Gotcha! When it emerged that Cherie Blair had entrusted a professional conman to buy her property in Bristol, it seemed that the great Labour spinning machine had been caught out with a Big Lie. The truth, inevitably, is infinitely more complicated, involving projectile vomit, frantic (and very public) phone calls on a crowded passenger train and ineptitude on a scale that would make a Tory blush. Andy McSmith reports

One day in the future an estate agent will be approached on behalf of a couple looking for a family house in the London area. The purchasers will be ideal customers in some respects – with a large sum of cash available and no difficulty in raising a mortgage, if needed – but they will attach unusual conditions to the purchase. It will need to be exceptionally secure, away from any main road or any other public area, and out of sight from passers-by. They will not want to visit properties themselves, but will send someone to look for them; and they will insist on absolute secrecy – because sooner or later, Tony and Cherie Blair are going to have to find a place of their own.

Let's hope they've found some more reputable friends to do the deal for them by then. Cherie's most recent venture into property ownership, using some of the money they raised by selling their old home in Islington to buy a couple of flats in Bristol, has provoked a controversy which has topped the news bulletins and knocked a serious hole in the Government's efforts to improve its public image. The affair has shown up the Prime Minister's wife as naive and absurdly trusting in her choice of associates. They include a professional conman from whom she accepted advice and money and an accountant suspected of money-laundering. She also had to fend off an accusation that she had implicated civil servants.

And after all the embarrassment and scandal, the Blairs will probably be back where they started, without a property south of the Wash, because the publicity has turned their newly acquired flats into security risks.

For the Government, the most embarrassing aspect of the affair is that the Downing Street spin machine was caught out telling what looked like an outright lie. The first report of a link between Mrs Blair and Peter Foster, a convicted fraudster, in The Mail on Sunday a week ago was tersely dismissed by the Prime Minister's spokesman Godric Smith, who claimed: "It is not true that Mr Foster was or is a financial adviser to the family."

Three days later, that claim was exploded by a series of leaked emails. We now know that Mrs Blair not only accepted Mr Foster's advice, thanked him profusely, and called him a "star"; she also allowed him to find an accountant for her, Andrew Axelsen, who is awaiting trial for suspected money laundering, and to pay him £4,000 for work done on her behalf.

While the revelations about Mrs Blair's naivety are embarrassing, much more damaging was the implication that someone in Downing Street had concocted a covering story which was essentially a lie. As usual in these instances, suspicion fell upon the Blairs' friend and chief adviser, Alastair Campbell. However, the truth seems to be not that a sinister Westminster lie machine moved into action and got caught, but that a few overworked and unfocused officials failed to see trouble ahead, and cocked up.

Questions were being asked last week about who in Downing Street actually spoke to Mrs Blair about the affair, and what they asked her.

The answer, according to an insider, is that no one did. On that fateful Saturday afternoon, when a series of questions about Mrs Blair arrived on the Downing Street fax machine from The Mail on Sunday, the most senior person on duty was a middle-ranking civil servant named Danny Pruce.

At that moment, Mr Campbell was at home, in bed, grappling with an attack of food poisoning. Godric Smith was on a crowded train, taking his children to watch the Arsenal-Aston Villa match. His mobile phone conversations could be overheard by other passengers. The Blairs were at Chequers, where Mr Blair was meeting the Irish Prime Minister, Bertie Aherne.

Apparently, the only person who actually spoke to Mrs Blair about The Mail on Sunday allegations was her husband. Presumably, Tony Blair must have known that his wife was flat-hunting in Bristol, though it is quite likely that earlier conversations had followed the familiar pattern of a frenetic wife talking to an equally busy, distracted husband: "I'm thinking of a flat for Euan in Bristol, dear." "What a good idea. Let me know how you get on."

The Prime Minister seems to have learnt for the first time last Saturday that somebody he had never met, who was the new boyfriend of Cherie's friend and fitness adviser, Carole Caplin, was helping with the deal.

By then Mrs Blair must have been made aware of Ms Caplin's lover's criminal history, something she claims not to have known when she allowed Mr Foster to go flat-hunting in Bristol on her behalf.

According to Downing Street, at the time when the couple made their first flat-hunting trip to Bristol, Cherie had never met Mr Foster. It was later that Ms Caplin reputedly told her: "I have got this new boyfriend. He has a colourful past, but he has changed now."

Even so, Mr and Mrs Blair decided together eight days ago that the whole matter was nobody's business but their own. The only person who knew them well enough to advise against this approach was Mr Campbell, but as he battled with projectile vomiting and other distressing symptoms, he failed to spot the possible dangers ahead. The decision to put out the brief, uninformative and potentially misleading statement was taken by the Prime Minister.

When Downing Street staff returned to work on Monday, it appeared that the decision had been a wise one, because no one appeared to be following The Mail on Sunday's allegations – many of which are still vehemently denied – and other, more political issues were dominating the agenda. According to one source: "What we didn't then do was spend hours and hours with Cherie saying 'let's look at the context' and what she said to Peter Foster and what he did, because Cherie would have said 'it's nobody's business what I do and who I talk to'."

Carole Caplin, meanwhile, was going through what must have been the worst experience of her life. Heavily pregnant with Mr Foster's baby, she was under siege from photographers even as she was rushed to hospital in the throes of a miscarriage.

Her publicist, Ian Monk said: "Was the miscarriage brought on by all this? Yes, probably, but that's a medical judgement."

Peter Foster, meanwhile, was fretting about his reputation. It seems that there is not much trust between Mr Foster and those who work with him. Four people connected either to him or Ms Caplin have gone to the publicist Max Clifford with stories for sale, including the ex-footballer, Paul Walsh. "People came to me because they were very worried that a conman, or indeed a man reformed, was getting very close to both Cherie Blair and Tony Blair," said Mr Clifford.

But neither Mr Clifford nor any of his informants had the truly damning evidence, the series of emails between the Prime Minister's wife and ex-conman, in one of which she had gushed: "I cannot thank you enough, Peter, for taking the negotiations over for me."

The Australian press assumed the story was a fantasy concocted by Mr Foster. To prove he had not been lying, he fired off copies of his email exchanges with Cherie to business contacts all over Australia. Within three days, the emails had reached The Daily Mail, who devoted nine pages of Thursday's edition to a remorseless attack on the Prime Minister's wife and on the apparent lie spun by No 10.

This was particularly galling for Godric Smith, who had made statements which fell apart in the light what had now been revealed. One persistent rumour is that he threatened to resign, until Mr Campbell prevailed upon the Prime Minister's wife to take the blame for any misinformation given to the press. A Downing Street source described the resignation rumour succinctly as "bollocks" and insisted that, once again, Mrs Blair had spoken to her husband, not to any officials, and Mr Blair had passed on the message that she wanted to issue a statement blaming herself, and herself alone, for what she called a "misunderstanding".

It is an acknowledged problem in Westminster that people think Mr Blair is surrounded by advisers and spin doctors who play fast and loose with the truth and bully others into doing the same.

The spin machine has devoted most of this year to a conscious effort to clean up its own image, especially since the fiasco at the former Department of Transport, where the Director of Communications, Martin Sixsmith, became locked in a public conflict with Jo Moore, a political adviser. Both lost their jobs.

The twice-daily lobby briefings that Mr Campbell used to conduct are now carried out on his behalf by career civil servants rather than political appointees. Mr Campbell, who once allowed BBC cameras to make a long film of him going about his work, makes no public appearances now, and speaks only to a few selected journalists. The two principal substitutes, Godric Smith and Tom Kelly, have been careful not to be caught spreading falsehoods. They might be selective in what they reveal but such information as they give out is meant to be true.

But their efforts to repair the spin machine's reputation were blown apart because the Prime Minister's wife had a friend who was in love with a man with a criminal record. Last week, the Westminster wags were saying: "The answer's obvious – Mrs Blair should resign."

One more blunder from the sultans of spin ...

So much for Labour's reputation as unassailable control freaks

Labour's spin doctors are reputed to be so clever that entire books have been written about their deviousness and the hidden power they wield. But are they as smart as they are made out to be?

Here are some true stories about Labour spin doctors which could help you judge for yourself:

The Ecclestone Affair

Tony Blair agreed that Formula One racing should be exempt from a European ban on tobacco sponsorship of sports events, after a private meeting with Bernie Ecclestone. Several senior spin doctors knew this, and knew that Mr Ecclestone had given £1m to the Labour Party. Their decision: say nothing and hope nobody finds out.

The Robinson Affair

When, Peter Mandelson, the greatest spin doctor of them all, was promoted to the Cabinet as Trade and Industry Secretary, he knew that his department was investigating the business affairs of a fellow minister, Geoffrey Robinson, and that he personally owed Mr Robinson £373,000 for an interest-free home loan. His decision: say nothing and hope nobody finds out. The outcome: Mr Mandelson became a backbench MP.

Charlie's mobile phone

Tony Blair needed enlightening on a newspaper story that Gordon Brown had ruled out a referendum on the euro in the 1997-2001 Parliament, so rang Gordon's famous spin doctor, Charlie Whelan. Mr Whelan discussed this most sensitive aspect of government policy with the Prime Minister on a mobile phone on the pavement outside a crowded pub, where he was overheard by some Liberal Democrats. The outcome: Mr Blair demanded that Mr Whelan be sacked, but he survived for a time, only to lose his job in the fallout from the Mandelson affair.

Drapergate

Derek Draper, Mr Mandelson's former adviser and a celebrated spin doctor in his own right, started a new career as a lobbyist. Approached by an American client, he boasted freely about his friends in Downing Street and about how he liked stuffing his bank account with £250 an hour. Unfortunately his "client" was an investigative journalist working undercover. Mr Draper now lives in California and has an ambition to help others who, like him, have experienced nervous breakdowns.

The Hinduja Affair

Back in office as Northern Ireland Secretary, Peter Mandelson tried to deal with a newspaper story that he had sought to help the wealthy Hinduja brothers obtain British passports in return for a £1m sponsorship for the Millennium Dome. Mr Mandelson publicly denied ringing the Home Office on the Hindujas' behalf. Mike O'Brien, then a Home Office minister, said he had received a call from Mr Mandelson. Believing the Home Office had written proof that the call was made, Mr Mandelson admitted it, and resigned. Later, he found out that the Home Office had no proof, and he reverted to his earlier denials – too late to save his ministerial career. Mr O'Brien is still a minister, Mr Mandelson is a backbench MP.

Philip Gould's rubbish

The man who introduced Labour to focus group research, and has advised the US Democrats among many others, is a habitual writer of indiscreet, embarrassing memos. He threw away rough copies of them in his bin. Why did he not know that Benji the Binman, an eccentric famous for stealing and going through eminent people's garbage, was operating in his part of London?

Jo Moore's email

While others watched the horrific television pictures from New York and Washington on 11 September last year, Jo Moore, personal spin doctor to the Transport Secretary, Stephen Byers, sent an email saying that it would be a good day to "bury bad news". Obviously, it did not occur to her that emails can be stored on computers – and passed on to journalists. Ms Moore lost her job.