Cash for honours is back to haunt Labour

The taxpayer has been forced to pay for the huge legal bill run up by Tony Blair's aides during the cash-for-honours police investigation. MPs expressed anger that a huge bill for private legal advice to Mr Blair's staff, believed to total around £100,000, has been quietly paid by the Government, and not by the Labour Party.

The revelation will raise fresh questions about the use of taxpayers' money as the Labour conference opens in Bournemouth today. Gordon Brown, in his first annual conference as Prime Minister, will try to heal bruises in the Labour Party created by the war in Iraq and by the cash-for-honours affair amid speculation that he is preparing to call an autumn election.

Speaking to The Independent on Sunday, Harriet Harman, the Labour chairman and deputy leader, refused to quash speculation about a snap October poll. She said the party was in a confident and up-beat mood and that election speculation was legitimate.

"Nobody is complacent. People are very determined and very confident. It's the job of the party to be ready for it [an election] whenever it is called," she said.

But fresh controversy about the affair – which centred on the nomination for peerages of wealthy Labour Party donors – threatens to cast a shadow over the conference. Labour MPs were last night dismayed that the taxpayer was picking up the bill for lawyers brought in for Mr Blair's special advisers questioned by police.

Bob Marshall-Andrews, Labour MP for Medway and a senior barrister, said: "If this is true it is an extraordinary departure from the normal payment of legal costs out of public funds. This was an entirely justifiable investigation and in such circumstances people who choose to retain legal advice must, under our system, pay for it."

Mr Blair's special advisers – who have an overtly party political role – hired lawyers who charged up to £400 an hour for their advice. Three firms of private lawyers are understood to have advised Jonathan Powell, Mr Blair's chief of staff, Ruth Turner, the former prime minister's head of government relations, and John McTernan, Mr Blair's former director of political operations.

The solicitors provided expert advice over several months during the investigation. Initially the Blair aides relied on advice from the Labour Party's own lawyers, but as the investigation centred on No 10's role, which led to the arrest of Ms Turner, the senior Blair aides switched to specialist solicitors. All three were cleared of any wrongdoing.

In contrast, Lord Levy, Mr Blair's personal fundraiser, paid his own legal bills. Other donors embroiled in the affair also footed their solicitors' fees.

The Cabinet Office confirmed that the bill for Mr Blair's special advisers had been paid by the taxpayer, but said it was justified because they were involved in the affair because of their jobs. "For civil servants involved in the investigation, including special advisers, it is only right as their employer that the Government ensured they had appropriate legal advice for the investigation of actions undertaken in the course of their official business," said a spokesman. "The cost to Government will be published in due course."

Opposition MPs accused the Government of misusing taxpayers' money. Norman Baker, the head of the Liberal Democrat accountability unit, said the payment was "an absolute disgrace".

"This is an enormous amount of money funded by the taxpayer not to protect the reputation of the civil service but to protect the narrow interests of the Labour Party and its political appointees," he said.

Gordon Brown is planning to fight the general election with health as a top priority. This week the Prime Minister plans to unveil a crackdown on teenage alcohol abuse.