Enron collapse engulfs Labour

LABOUR has been plunged into a new sleaze row over its links with Enron, the world's biggest corporate bankrupt. Facing accusations of a 'cash-for-access' scandal to dwarf those which plagued the Major administration, Downing Street mounted a frantic fightback.

The storm erupted after Ralph Hodge, former European boss of the collapsed US energy giant, said the company gave £36,000 to Labour to gain access to ministers and reverse a ban on the building of gas-fired power stations.

Tory chairman David Davis claimed there was evidence that Prime Minister Tony Blair personally ordered the lifting of the ban and should 'clarify' his role in the episode. A rattled Downing Street hit back with an unusually detailed statement confirming that four ministers met Enron executives but denying any impropriety.

But the attempt to smother the scandal only encouraged Tories and Liberal Democrats in their calls for a full inquiry. They demanded to know why former Trade Secretary Peter Mandelson allowed Enron's 1998 purchase of Wessex Water without a Monopolies Commission investigation, a decision which came days after the firm handed over £15,000 to buy tables at the 1998 Labour party conference dinner where Blair and the entire Cabinet were present.

The £55bn crash of the US energy group last November was the world's biggest bankruptcy.

MPs are demanding a separate inquiry into Labour's 'extremely close' relations with Enron's auditors, the accountancy firm Arthur Andersen, which is accused of shredding documents about the company's collapse. Andersen had been barred from Government work for 12 years after its blunders over the collapsed DeLorean car company.

It was rehabilitated when Labour came to power in 1997 after helping Gordon Brown draw up his windfall tax on privatised utilities in opposition. Since then the firm has won an estimated £30m in taxpayer-funded work.

The most potentially damaging allegation for Blair is that of personal involvement in the reversal of policy over gas-fired power stations. The ban was originally introduced to protect the coal industry.

Tory chairman Davis said a report in 1999 quoted the American embassy as saying the Prime Minister 'had recently intervened to water down the moratorium proposals'. It was suggested he feared the Government could be sued on anti-competition grounds. Davis said: 'Tony Blair now needs to come clean about the whole affair and in particular the role he played.'

The accusations of sleaze surfaced at the weekend when Hodge linked Enron's cash donations to its access to ministers at the 1998 party conference dinner. 'I do not think we would have been successful at getting a table full without donations and I suspect if we had just invited them to dinner, then attendance would have been zero,' he said. 'It is clear that in the current climate, sponsorship and donations are the most efficient ways of getting access'.

He repeated his assertions on Monday night, saying Enron felt it had no choice but to give Labour money to gain access to Ministers. It feared it would 'clearly be at a disadvantage' if it did not offer the cash. The firm bought tables at the conference to get to know British political life, he told Channel 4 News.

Asked if the intention was to lobby against the moratorium, he said: 'As a separate matter. In requesting meetings with Ministers or civil servants, correct. But that is quite separate from any issue of contributing or sponsoring any events.'

A Labour spokesman made a tortuously worded statement denying that Enron had made any direct donations to the party, as all the money had been used to pay for functions.

The Prime Minister's official spokesman said ministers had many meetings with Enron executives in 1998, 1999 and 2000. He named former Trade Secretaries Peter Mandelson and Stephen Byers, and former energy ministers John Battle and Helen Liddell.

Mr Blair had not formally met anyone from Enron, 'although I cannot say for definite that he has not bumped into someone at an event,' his spokesman added. That was seen as a strong indication that informal talks did take place. 'We would refute absolutely that there has been any impropriety,' said the spokesman. He said Government policy on gas-fired power stations had been guided by what was best for the market. The Labour Party spokesman described the allegations as 'completely without foundation'.

But Tory shadow cabinet office spokesman Tim Collins said his party was asking both the Cabinet Secretary and the Commission on Standards in Public Life to launch an investigation into the affair. Collins said the appointment of former Labour party fundraiser Jonathan Powell as Blair's Downing Street chief of staff had created difficulties from the Government's first days because it made him 'gatekeeper to the Prime Minister'.

Enron: The questions Labour must answer