Tough love: How to flirt with tycoons and stay a virgin

Donald Macintyre on Labour and cash

What are the long-term lessons from the Ecclestone affair? The one certainly positive outcome will be a revolution in party funding. Sir Patrick Neill, chairman of the committee on standards in public life, and Lord Nolan's successor, is obviously keen to carry out the fundamental review that will be needed before next summer.

There is a historic irony here; just as Lord Nolan's committee was set up after the cash-for-questions affair in emergency conditions which made it virtually impossible for the government of the day to ignore its findings, so Sir Patrick's enquiry into political funding, though always intended by the new government, begins its enquiry in circumstances that also make it difficult for the government of the day to ignore what he proposes. Sir Patrick is in a powerful position, all the more so since there is now no danger that whatever he recommends will be seen as an attack on one party rather than another.

There isn't an instant, easy answer. A cap on spending, much discussed in the last 48 hours, is undoubtedly desirable. Because broadcasters in the UK have a statutory duty to be impartial, and because there is no paid-for TV advertising, there is no reason, as Paddy Ashdown's Liberal Democrats have shown, why national campaigns shouldn't be fought with a great deal less money than they are at present by the two biggest parties. But a cap still makes it possible for big businesses, or trade unions, or animal rights lobbies, to spend millions on advertising for a cause which, because only one main party believes in it, is identifiably helpful to that party in an election campaign.

Public funding also has its powerful opponents, inside and outside the Government. One ground for opposition is the strong belief that taxpayers would object to paying for the upkeep of party politics. Another is that it could fossilise political parties, accentuating the historic relative fall in individual membership, and making them even more sclerotic organisations than they are already. And a third, which worries some in the Labour Party, is that it will spell the end of the final institutional link between party and the trade unions.

All these objections, however, are worth a little more examination than they have had so far. Certainly it seems a bit risky to expect the public to cough up for their politicians, who enjoy, with journalists, lower popular esteem than any occupational group including estate agents. On the other hand the public also don't much like money being thrown at politicians by the more self-seeking elements of the private sector, as the electors of Tatton demonstrated when they chose Martin Bell in preference to Neil Hamilton. And as Vernon Bogdanor, professor of government, argued yesterday, the public do already pay for a lot of their politics through their taxes, whether through state subsidies for the Opposition, for public meeting- rooms and free delivery of election addresses, or though their BBC licence fees in providing party election broadcasts. There is even, incredibly, tax relief on donations to political parties. Secondly, if state funding were tied to party membership on a pound-for-pound basis - as some Tory politicians such as Tristan Garel Jones have suggested in the past - it could have a galvanising effect on membership recruitment. Finally, while some may strongly oppose ending union funding, there are others, in trade unions, as well as in the party, who believe that the final break is in the interests of both. But even if the Neill committee doesn't come out in favour of a wholesale shift to state funding, the very minimum it will surely contemplate is a strict cap on total expenditure - as well, probably, as on individual donations - with total disclosure. That means amounts as well as names held on a publicly inspectable register, continuously updated.

But the second lesson has to do with the Government's dealings with rich and powerful businessmen. Ever since the existence of the Ecclestone donation came to light the Tories have been severely inhibited in their attacks, because of the awe-inspiring level of their own indebtedness to Mr Ecclestone in the past. Perhaps that's why not a single Tory on Wednesday even asked the Prime Minister a pointed question about whether the donation was referred to Sir Patrick Neill only after the first questions from journalists, late in the day last Friday. As an opposition, therefore, it has been more tainted than the Government. But it's questionable, first whether Mr Ecclestone was a suitable donor for Labour in the first place, and secondly whether his advice on the dire consequences of applying the sponsorship ban was as disinterested as the Prime Minister - and perhaps Helmut Kohl and Romano Prodi, who also both saw Mr Ecclestone - appear to have assumed it was. Harnessing business support was an essential and entirely honourable part of what Blair brought to New Labour. But when it comes to party donations, or simply bending the Prime Ministerial ear in the warmth of the Downing Street study, there is a distinction between the broad and collective view of a group of company chairmen about where the national interest lies, say, on Europe, and the single-minded pursuit of commercial success by one interest or another.

Blair will have to show that he can face down business opinion on occasion, as well as bow to it. He has already shown that he is capable of leading, as well as following, business opinion. The painstaking education of employers in the logic and justice of the national minimum wage was a stunning success. But there will be other fights. Blair has triumphed over the vested interests in his own party. But there are vested interests in business as well, whether or not they come with an open cheque book.