Politics: Blair aide emerges as key player in Formula One affair

The spotlight fell yesterday on Jonathan Powell, Tony Blair's right hand man, as a key figure in the centre of the controversy surrounding Bernie Ecclestone's million-pound gift. The money is due to be returned, but Labour faces a rebuff from the unions if it expects them to make up the shortfall. Kim Sengupta, Fran Abrams and Barrie Clement track the shifting scene.

At the crucial meeting on 16 October, in which Labour's U-turn on tobacco sponsorship was decided and the seeds of future strife sowed, the Prime Minister was accompanied by his chief of staff, Jonathan Powell. Both of them were aware that Formula One chief Bernie Ecclestone had donated pounds 1m to the Labour Party.

The Prime Minister and Mr Powell listened to the arguments for exempting Formula One racing from tobacco sponsorship from Mr Ecclestone, and two lobbyists for the sport, Max Mosley and David Ward. A civil servant was also present, but no minutes were kept of the meeting.

Informed sources have revealed that Mr Powell was a key figure in persuading the Prime Minister that the tobacco ban should not extend to Formula One. Tessa Jowell, the minister for public health, and Frank Dobson, Secretary of State for Health, were both opposed.

Mr Powell, who it is believed had been due to become Mr Blair's Principal Private Secretary, is said to be friendly with Mr Ward, who at one time worked as a researcher for John Smith, and arranged the 16 October meeting.

Officials confirmed last night that Labour officials spoke to Mr Ecclestone's aides about the possibility of a second large donation after the general election. But it was still not clear whether the Prime Minister and his senior official knew about that when their meeting took place. A spokesman said there was "a distinction" to be made between the two operations.

The spokesman said the meeting on 16 October was to allow Mr Ecclestone to put his case for exempting Formula One from a ban on tobacco advertising.

"It was an occasion where the Prime Minister was listening to the point of view of his visitors. The arguments were reasonably well known - they had already been put to the Department of Health," he said.

"Jonathan Powell is the Prime Minister's chief of staff. It seems to be reasonable therefore that he should be in such a meeting."

Both Mr Blair and Mr Powell met Mr Ecclestone before the election. In addition, Mr Blair took his children to Silverstone last year, where they were driven around the race track by Damon Hill.

Mr Ecclestone had said he does not want the money back. But Labour sources said last night that the party was determined to return the pounds 1m.

But the party simply does not have the money, with an overdraft of pounds 4.5m from the Co-op Bank. The unions said last night they would not be willing to bankroll the shortfall.

Yesterday the Prime Minister was again forced to defend his party's position. Speaking before an engagement in County Durham, he said the decision to exempt Formula One was "absolutely right".

"It was us which referred this matter to Sir Patrick Neill, who is the official watchdog. He made his recommendation, we followed it to the letter. And frankly to be chased around by a bunch of Conservatives who have never disclosed any of their donations and never returned a donation in their lives is pretty ridiculous," he said.

Last night the Tory leader, William Hague, called for a full account to be given of what happened at the meeting. "If there are no minutes we need an explanation as to why no note of the meeting was taken. If the Prime Minister will not give a full account of this issue we will be forgiven for believing that he has something to hide."