Lib Dem deputy investigated over lobbying

Simon Hughes is accused of failing to declare donations to local party

Hughes allegedly lobbied on behalf of Southwark Metals, which gave £10,000 to the local party in May (Getty Images)

The Liberal Democrat deputy leader, Simon Hughes, is under investigation for allegedly lobbying on behalf of a company that donated thousands of pounds to his local constituency party, The Independent on Sunday can reveal.

The Parliamentary Commissioner for Standards, John Lyon, has launched an investigation into claims that Mr Hughes broke House of Commons rules by lobbying "public office holders" – and that he failed to register donations made by three companies to the Bermondsey and Old Southwark Liberal Democrats.

The investigation was sparked by a Labour complaint that Mr Hughes's team did not declare £10,000 given to his local party in May by Southwark Metals when they tried to arrange meetings about a related company's proposal to develop premises for a free school and 160 flats in the area.

Peter John, the Labour leader of Southwark Council, told the watchdog that Mr Hughes had attempted to arrange meetings with fellow MPs and councillors to discuss the "Rotherhithe New Road regeneration project", put forward by SCCD Developments – which owns Southwark Metals. Mr John complained that the MP should have declared the organisation's financial connection to his party.

Labour also claimed that Mr Hughes had mentioned Southwark Metals and City Cruises during debates in Parliament without declaring that both had donated thousands to his local party.

The IoS understands that Mr Lyon has launched an inquiry into whether the MP is guilty of "lobbying for reward or consideration in a meeting with public office holders". He will also investigate the allegation that in the last five years Mr Hughes failed to register donations to his constituency party from three companies, "despite the links he had with the donors", and that he failed to declare two of these interests in Parliament. Electoral Commission records show that City Cruises has given the local Lib Dems £3,300 since December 2007 and Southwark Metals donated £10,000 on 15 May this year.

Labour also pointed out that in September this year, during a debate on attempts to reduce metal thefts, Mr Hughes referred to the views of "a gentleman called Tom Pratt, who runs Southwark Metals, which is a very reputable organisation based just outside my constituency". He did not acknowledge the financial contribution in his remarks. However, their complaint, that mentioning Southwark Metals during the speech amounted to lobbying, was rejected. There is no suggestion that the companies involved have broken any rules, or that Mr Hughes benefited personally from the donations – or any alleged lobbying.

But the investigation poses serious dangers for the Lib Dem deputy leader, who could be publicly reprimanded or even suspended from the Commons if he is found guilty of breaking any rules. The suggestion that he may have been canvassing support for a free school could also harm his reputation as voice of the grass roots within the Lib Dem hierarchy, as many party activists remain opposed to the new institutions.

Last October, when the Government announced that it had allowed two free school applications in Southwark to move towards the next stage of the application process, Mr Hughes said: "It is no secret that I think that free schools are not the best way to meet the urgent need for extra school places in the north of our borough.

"If the Labour council had not taken so long to accept the need for more school places in the north of the borough, plans for a new secondary school could have been sorted by now. I hope that nonetheless we can now get an agreement about the best sort of new secondary school locally."

The Lib Dems said last night that the complaints against Mr Hughes had arisen during a fiercely contested local election campaign last month – and that Mr Lyon had rejected some of Mr John's claims. A party spokesman said: "The donations have been declared on the Electoral Commission website, and are permissible donations. Simon will fully co-operate with any investigation and feels that it's inappropriate to comment further."

Gavin Edwards, a Southwark Labour councillor, said: "Simon Hughes and the Lib Dems have got serious questions to answer over why their donations were not fully declared.

"MPs have a duty to be open and transparent about these donations and we are confident the Commissioner will get to the bottom of this matter."