Is Britain's Labour selling lordships?

Four were then proposed for lordships. Three have subsequently asked for their nominations to be withdrawn. A fifth, Rod Aldridge, was chairman of a company which benefited from government contracts. Mr. Aldridge quit his job last week, the first victim of the burgeoning cash-for-favors scandal.

Another Labour donor, Chai Patel, said he offered a £1.5 million ($2.6 million) gift, but was urged to make it a loan instead, thus ensuring it passed under the radar of parliamentary scrutiny. He was later nominated for a seat in the House of Lords (a peerage). Mr. Patel is scheduled to testify Tuesday on the matter.

"If I say I'll give you £1.5 million ($2.6 million) for your party, and you say, 'No, don't give it to me, lend it to me,' what is that all about?" asks Elfyn Llwyd, an opposition MP. "Can there be an innocent answer to that question?"

Mr. Llwyd has made a formal complaint to police, who are now investigating whether Labour breached a 1925 law passed after a former prime minister, David Lloyd George, was found to have sold knighthoods for personal gain.

"If we are serious about bringing transparency into this scenario, then there will have to be some partial funding from the state purse," Llwyd adds.

In the wake of the latest furor, Blair has tasked a top former official to look into party financing and the possibility of state funding, and a parliamentary committee is also looking at options for reform. But not everyone believes state-funded politics would be popular.

Donald Shell, lecturer in politics at Bristol University, says that the public would take a dim view of being asked to bankroll elections in which fewer and fewer people are bothering to vote.

"There is so much disdain for politics now, such a lack of respect for parliament and politicians, that the government is very nervous about introducing any "gravy train" arrangements like state funding," he says.

Better alternatives might be to introduce tax-efficient donations, to cap the level of donations from individuals to perhaps £10,000 ($17,400), and to lower the ceiling on election spending, currently £20 million ($34.7 million) per party. The UK Electoral Commission says greater public and party consensus is needed before these changes can be made.

Blair meanwhile insists Labour has done nothing wrong in the loans affair. He has turned the debate around, saying that people who give money to political parties should not be barred from honors.

But the public are not impressed. A recent poll showed 56 percent of voters believed the loans-for-lordships allegations were true, and almost three-quarters agree that Blair's government is now as tainted by sleaze as that of his predecessor, John Major. "If it is established that there were definite offers from his office to big donors, then he's in the most terrible trouble," says Dr. David Baker, a politics expert at Warwick University.

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