Money scandal hits Blair despite promise of no sleaze

Top adviser was one of two British officials forced to quit over a loan.

Tony Blair's 1997 general-election promise to lead a sleaze-free government suddenly seems very empty.

Two of the British prime minister's senior supporters have been plunged into political disgrace because of involvement in a financial scandal.

Peter Mandelson, widely regarded as principal architect of the modernized Labour Party, and multimillionaire Geoffrey Robinson, a ministerial colleague who granted him a huge undeclared loan to purchase a house, have been forced to resign their government posts.

Mr. Mandelson was secretary of state for Trade and Industry. Mr. Robinson was paymaster general in the Treasury department. Both helped to fight last year's general election on a platform that accused former Prime Minister John Major's Conservative government of widespread political and financial corruption.

William Hague, leader of the opposition Conservative Party, is demanding to know whether Robinson secretly bankrolled other senior ministers, including Chancellor of the Exchequer Gordon Brown.

Supporters of Mandelson, who helped Labour in opposition to shed much of its socialist political baggage, have accused Mr. Brown's chief spokesman of causing his downfall by leaking details of the Robinson loan. Brown has denied the charge.

Underlying the scandal is the unresolved question of how modern politicians, lacking accumulated wealth or sizable incomes, can fund their pursuit of office.

In comparison with their counterparts in continental Europe and the United States, British members of parliament (MPs) earn modest salaries and can claim only small, closely monitored expenses.

Several of the financial scandals that afflicted the Major government centered on attempts by MPs to bolster their incomes by questionable means.

Mr. Blair insisted yesterday that his governing program would be unaffected by the crisis, but political commentators were virtually unanimous in saying his administration is entering 1999 with its squeaky-clean image tarnished and its political center of gravity severely shaken.

Jon Snow, anchor of the respected Channel Four News program, commented that the forced resignations of Mandelson and Robinson amid charges of cronyism and financial manipulation, are "an ax blow to the heart of the Labour government."

Andrew Marr, a leading political analyst, said: "Blair has been badly hurt by this episode."

The crisis was triggered by the revelation in the Guardian newspaper last week that in November 1996 - six months before Labour's general-election victory - Mandelson accepted a loan of 373,000 ($623,000) from Robinson and failed to declare it to parliamentary authorities.

Mandelson is also alleged to have negotiated a further loan of 150,000 ($250,000) from a mortgage company without mentioning, as required by law, his earlier acceptance of money from Robinson.

The loans were to pay for a house costing nearly 500,000 ($836,000) in a fashionable area of London.

Two days after the scandal broke, Mandelson and Robinson resigned their posts and both remain under parliamentary investigation, leaving Blair to explain how their conduct squares with Labour's 1997 promise to make British politics a "sleaze-free zone."

As well as being seen as a Machiavellian figure who daily offered the prime minister advice on political tactics and strategy, Mandelson seemed to personify "new" Labour.

He was pro-big business, scornful of his party's former deep attachment to socialism, and cut a high-profile figure among London's "glitterati."

Mandelson's social circle included several millionaires and prominent media figures including Elisabeth Murdoch, daughter of media magnate Rupert Murdoch, and an executive in her father's Sky News organization.

At the same time, Mandelson made many enemies within the upper reaches of the Labour Party - most prominently Chancellor Brown, deputy Prime Minister John Prescott, and Foreign Secretary Robin Cook.

The manner of his departure from office has highlighted what Labour's sweeping election victory did much to disguise: a persistent rift within the party between so-called Blairites, dedicated to modernization, and traditionalists who believe the Blairites, under Mandelson's influence, had broken faith with Labour's past.

In an interview with the BBC yesterday Blair said Mandelson's departure would make little difference to the Labour Party, which was "bigger than any individual."

"What is important now is that we keep a sense of perspective about it," Blair said. "There will be a certain number of people who will be foolish enough to think that Peter's going means that somehow there's some blow to the project of New Labour.

"That goes on. We got elected as New Labour - we'll govern as New Labour," he vowed.

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