Leading Article: Now try to rebuild trust

THE ECCLESTONE Affair has done severe, perhaps irreparable, damage to the Labour government's best intentions. When Tony Blair told us he had a mission to rebuild a bond of trust between government and the people, we applauded him. Now it looks as if his promise to "give a moral lead" is empty rhetoric. Every time Peter Mandelson appears on radio and television to tell us we should have only praise for the Prime Minister's behaviour over Bernie Ecclestone's pounds 1m donation, and the promise of more, that delicate bond of trust is further weakened. Of course, it is possible that the Prime Minister's office will release Jonathan Powell's notes of the meeting on 16 October at which tobacco sponsorship for Formula One racing was discussed, and that they will show the conversation was entirely motivated by Mr Blair's determination to give a moral lead. Until then, we shall find it very hard not to believe it was "pay-back time": Mr Ecclestone paid pounds 1m into Labour's funds; shortly afterwards, the leader of the party intervened in a matter which would normally be of concern only to more junior members of his Cabinet. The outcome was that the motor racing industry's chances of retaining the valuable sponsorship of tobacco companies was much improved. That's politics.

But Tony Blair has done British democracy a favour, though not in the way he might have intended. The example of Mr Ecclestone's generosity removes any illusions about the motives of many - though not all - lavish donors to political parties. For businessmen, the motive is, by their own standards, honourable. They are buying access to government and the chance of an audience on subjects that concern their business. In the olden days, when two-party politics meant business financed one and the trade unions the other, there was a rough kind of equilibrium. But since Mr Blair has transformed Labour into a party of the unions and business, the situation is transformed. If business is to become the principal paymaster of both parties, the time has come, first to make the relationship more open, and then to think hard about whether it is time to call a halt to it.

Mr Blair's favour to democracy is to weaken the case of the party bureaucracies. They all think the same; fundraisers instinctively prefer to operate in secret. But, after last week's revelations, it is surely inconceivable that the amounts as well as the sources of donations will not also have to be revealed. Nor is it remotely sustainable that publication can occur only annually. Sir Patrick Neill and his Committee on Standards in Public Life ought to recommend regular updating of a list which is as easy to inspect as the Register of Member's Interests in the Commons. Ideally, every donation should be publicly registered as soon as it is made.

A good start, but radical reform will occur only when the whole environment in which parties raise money is fundamentally altered. One essential element is the reform of the House of Lords. The honours system is a mechanism for rewarding people who give money to political parties, and a seat in the Lords is usually considered the best reward of all. Most life peers are principled men and women, but the presence among them of peers who have bought their title is a taint on Parliament that will not be removed until the second chamber becomes an elected body.

However, we cannot wait for the reward system to be changed. The serious way to begin to clean up politics is to impose severe limits on campaign spending, and to share the funding of political parties between the state and the individual contributions of party members and their constituency parties. Opinion-poll evidence shows considerable hostility to state-funded politics, but there is also clear evidence to show voters are fed up with allegations of financial sleaze in politics. It is argued by opponents that state funding would cause political parties to stagnate by removing the need for them to recruit members. The answer is to match state spending, perhaps pound for pound, with the amount raised by the parties themselves through membership subscriptions - though not through large single donations, such as Mr Ecclestone's. Of course politicians are unpopular, and the taxpayers' willingness to finance them is severely limited. But this is a circular argument. One of the reasons they are unpopular is precisely the deeply haphazard and questionable method of party funding; another is the expensively fatuous activity which passes for serious campaigning at election time. There are members of the Neill committee who are understandably queasy about the corporatist implications of state funding. There is no doubt that it raises many awkward questions, but the Ecclestone Affair makes some form of state funding much more likely than it was a week ago.