LONDON (Reuters):

British Prime Minister Gordon Brown called for reform of political funding rules yesterday after the millionaire businessman at the heart of a secret donation scandal said the ruling Labour Party was at fault.

Brown said revelations that property developer David Abrahams donated £600,000 (US$1.24 million) to Labour through intermediaries had shown the need for "immediate change" in his party and "broader change" in the funding system.

"I am angry, as you are, when standards fall below what we and the general public want and have a right to expect," he told a party meeting in west London.

He said he was saddened by the situation, which is under investigation by police.

The opposition Conservatives accused Brown of trying to put up a smokescreen around the secret donations scandal, saying he had rejected Conservative proposals for funding reform.

The scandal has plunged Brown into the worst crisis since he took over the reins of the Labour Party from Tony Blair in June.

Abrahams said he had made the donations anonymously because he did not want to attract attention to his wealth.

"I trusted Labour to ensure that donations were received and spent in the manner they were intended, as anyone in my position would," he wrote in the Guardian newspaper.

In response, a Labour spokesman said the party was cooperating fully with the police investigation but would "not be providing a running commentary".

EMBARRASSMENT

The scandal is deeply embarrassing for Brown because he took office pledging to restore trust in government after Blair's last months in office were clouded by a police probe into allegations that political parties had offered state honours in return for loans. That probe ended without charges being filed.

British law requires people donating on behalf of others to disclose the source of the money. Brown has said the funds from Abrahams would be returned.

Abrahams earlier told Channel 4 News that Brown's chief fund-raiser Jon Mendelsohn knew about his method of making donations in April, five months earlier than Labour said it did.

But the Guardian newspaper said Mendelsohn flatly denied this.

Brown called for a renewed push to reform Britain's rules on political party funding based on proposals by former senior government official Hayden Phillips. Months of cross-party talks on those proposals - which called for limits on spending by political parties - broke down in October.

The secret donations affair - coupled with a crisis at mortgage lender Northern Rock that led to Britain's first bank run in more than a century and the government's loss of computer discs containing half the nation's personal data - has sent Brown's popularity plunging.

A survey this week put the Conservatives 11 percentage points ahead of Labour - their biggest lead since the 1980s.

A number of senior Labour figures have become embroiled in the row. Deputy Labour leader Harriet Harman has said she acted in good faith in accepting a £5,000 donation from Abrahams through a go-between.

Introducing Brown yesterday, Harman conceded it had been a "very painful week" for Labour, in power for the last decade.

REUTERS