£2m mystery gift to Labour raises issue of funding

Labour officials fear that huge donations to the party will dry up when a new law forcing them to specify the amounts given by big donors takes effect next month.

Labour officials fear that huge donations to the party will dry up when a new law forcing them to specify the amounts given by big donors takes effect next month.

Their concerns were heightened yesterday by the news that the party has received a £2m gift from an unnamed businessman, a donation possibly timed to prevent the scale of the contribution from being disclosed under the new law.

Senior Labour officials are worried that the party will face a cash crisis, with prominent public figures shying away from having the size of their donations revealed. This could hamper efforts to raise money for the general election expected in May, unless other prospective donors get round the new disclosure rules by giving their cash immediately.

Privately, some party officials are furious that Labour ministers did not realise the likely impact when they decided to implement a shake-up of political funding recommended by Lord Neill of Bladen's Committee on Standards in Public Life. One said: "There may be a strong case for disclosure but we will pay a heavy price for it."

Labour already publishes an annual list of people who donate £5,000 or more to the party but does not disclose how much they give. The Political Parties, Elections and Referendums Act, which takes effect on 16 February, will require all parties to name such donors and the amounts they provide.

Labour rejected pressure to name the party's big backer yesterday. A party spokeswoman said: "We do not comment on any individual donations. We do not give a running commentary. Labour has been at the forefront of the disclosure of political donations and we are proud of our record."

But the revelation had unwelcome echoes for Labour of the Bernie Ecclestone affair. The party returned £1m to the Formula One boss when the Government decided to exempt motor racing from a ban on tobacco sponsorship after he lobbied Mr Blair.

Although the new £2m donor remains a mystery, there was speculation last night that the money may have been given by one of Labour's existing donors rather than a new name. The list includes Robert Bourne, whose Legacy consortium is expected to take over the Millennium Dome at Greenwich; the publishers Lord Hamlyn and Lord Gavron; the broadcasting mogul Lord Alli; the property developer Haris Sophoclides and the Political Animal Lobby, which gave Labour £1m before the 1997 election. The Science minister Lord Sainsbury of Turville, who gave a £2m donation in 1999, is not believed to be the new mystery backer.

Martin Bell, the Independent MP who won Tatton on an anti-sleaze ticket in 1997 and is to stand at the next election, said:"Allegations about large donations have caused enoughtrouble in the past for us to know that the public has to have confidence in the system. That only comes from true transparency."