Andrew Grice: The Week In Politics

Buying Commons seats is a scandal, too

When Tony Blair met David Cameron this week to discuss how parties are funded, their talks were less tribal than expected. Mr Blair even asked whether Mr Cameron was getting much sleep after the birth of his third child.

On party funding, the two leaders realised they had more in common than they would care to admit publicly. Labour has attracted more headlines since the "loans for peerages" scandal broke than the Tories. It has deserved them since Mr Blair nominated four lenders for peerages.

The Tories may have got off lightly so far but, as they meet in Manchester this weekend for Mr Cameron's first major conference as leader, there are jitters that what started as a damaging story to Labour may yet harm the Tories too.

The Metropolitan Police is looking into whether the parties broke a 2000 Act which outlaws foreign donations and says that loans not taken out on commercial terms should be regarded as donations - with the backers' names revealed. The Tories have taken some loans from people not registered to vote in UK. There is also a suspicion that some of their loans were on non-commercial repayment terms. Jonathan Marland, the Tory treasurer, admitted last year: "We receive more favourable interest rates from our supporters than we would from the banks. It is good commercial practice."

In their chat on Tuesday evening, neither Mr Blair nor Mr Cameron could afford to crow about the other's problems. So they accepted in principle that taxpayers will have to stump up more money for parties.

Some differences remain. The Tories want the reforms to disconnect Labour from its trade union founders by imposing a £50,000 cap on donations. Labour argues that, as unions must ballot their members before setting up a political fund, union donations can be seen as lots of individual donations. In turn, Labour plans to change the law to retrospectively force the Tories to unmask the donors who lent them £5m but who have been repaid so their names can remain secret.

At last year's general election, the Tories were able to outspend Labour in key marginal seats to devastating effect. Twenty-three of the 31 seats the Tories won from Labour were targeted by three Tory donors who channelled money direct to constituencies -- the party's deputy chairman Lord (Michael) Ashcroft, Lord (Leonard) Steinberg and Robert Edmiston, who was proposed for a peerage but blocked by the Lords Appointments Commission.

In 19 of these 23 seats, the Tories outspent Labour by an average of 2.5 times. The swing to the Tories in the 23 constituencies averaged 4.5 per cent, against a national average of 3.1 per cent.

Bearwood Corporate Services, the vehicle for Lord Ashcroft's donations, gave a total of £844,000. The Midlands Industrial Council, set up by Mr Edmiston, donated £370,000 and Lord Steinberg £101,000 -- a total of more than £1.3m between them in 93 seats.

The direct grants to constituencies were perfectly legal: they were made in the two years before the election and so did not count against the local spending limits for each candidate that kick in once the three-week campaign begins.

One of the possible victims, Peter Bradley, who lost his seat in The Wrekin, has written to the Electoral Commission urging it to close this loophole. A dossier he has produced on the three Tory donors is being taken "very seriously" in Downing Street, according to Blair aides. Labour is likely to propose limits on such donations in its evidence to the party funding inquiry.

Mr Bradley is right to argue that it would be absurd to continue the cap on national election campaigns without curbing pre-election spending at local level. "It cannot be right that elections should be decided not by who wins the argument but by a handful of millionaires in a handful of marginal seats," he said.

With a tight election possible next time - and lower national spending likely to form part of the state funding package - it will be even more important to stop rich donors funding freelance campaigns at local level. One answer would be an annual spending limit locally.

Labour and the Tories will surely have to unhook their drip-feed from the millionaires and attract small donors. The commission and the inquiry should take an interest in Mr Bradley's dossier. If "loans for lords" is a scandal, then so is buying seats in the Commons.

a.grice@independent.co.uk