Mittal company failed to disclose Labour donation

The controversy surrounding Labour's links to the Indian billionaire Lakshmi Mittal reignited last night when it emerged that his firm had broken company law by failing to disclose a donation to the party.

Ispat International (UK) Ltd admitted to The Independent yesterday that it had failed to include in its annual accounts an £8,000 donation given to Labour before the 1997 general election. The failure, which breached the 1985 Companies Act, was described as "an oversight" by the company and was corrected two days ago.

The exact amount of the donation had been unknown until yesterday, as it was recorded in Labour's own list of donors simply as "more than £5,000".

Labour faced further criticism of political interference with the civil service last night when it emerged that Millbank officials had discovered that The Independent was making enquiries about the donations with the Department of Trade and Industry. Within an hour of a query being lodged, a Labour press officer contacted the newspaper and asked about the nature of the investigation.

The 1997 donation was revealed last week after a "cash for favours" row blew up over another donation of £125,000 that Mr Mittal gave to the party last year.

Mr Mittal gave the bigger gift two months before Tony Blair wrote to the Romanian Prime Minister to back the billionaire's £300m purchase of the country's Sidex steel plant.

In a statement issued yesterday, a spokesman for Mr Mittal's company confirmed that the 1997 donation had not been recorded in the accounts and that the "oversight" had been changed this week.

"In the financial year 1997, Ispat International (UK) Ltd made a donation of £8,000 to the Labour Party. The donation was properly recorded as a non-tax deductible expense in the books of the company which are and were audited by Ernst and Young.

"Due to an entirely inadvertent oversight the 1997 accounts of the company omitted a direct reference to this donation. Steps have been taken to ensure that there can be no repetition and an immediate correction has been filed and, we expect, registered with Companies House."

Under the 1985 Companies Act, Companies House is now open to prosecute Ispat International for a breach of the statutory duty on companies to disclose any gifts of more than £200 given to political organisations or charities.

Last night, Tim Collins, the Shadow minister for the cabinet office, said the revelation, together with Labour's attempt to rebut it, added further weight to the Tories' calls for a full investigation into the Mittal affair.

"Yet another week goes by with yet more questions to be answered. Ispat's explanation that this was an 'oversight' doesn't adequately explain what went on," he said.

"Labour's relations with the civil service are at an all time low already. Their arrogant attitude is ensuring that this story will rumble on into another week."

The Prime Minister attempted to shrug off the Mittal affair in a keynote speech to the Scottish Labour Party conference in Perth yesterday.

"Forget the daily news froth and frenzy. All of that will come and go. It's not the ersatz scandals we need face. It is the hard and very real choices to build a fairer Britain," he said.