Labour hit by 'honours for software' row

THE American boss of IBM was granted a knighthood by Tony Blair shortly after his computer company gave Labour high-tech software for 'next to nothing'.

Louis Gerstner Jr received what is a rare award for a foreigner - and given access to Downing Street - following the deal for a system to keep party members 'on message'.

The row is the latest controversy over honours for businessmen who have helped the Prime Minister, and Tory MPs last night demanded an explanation for the new revelations.

IBM provided a network via its Lotus subsidiary to let Labour bosses give orders to grass-roots activists in time for the 2001 Election campaign.

At the same time, the Government named Mr Gerstner as an honorary Knight of the British Empire 'for services to education and e-commerce'.

The company's involvement with Labour campaigning only came to light after an e-mail intended for Government Minister Lord Mcintosh was sent to Tory MP Anne McIntosh by mistake.

Written by Labour's IT adviser Lord Mitchell, it said: 'I persuaded [Lotus] to do a lot of work for next to nothing - work which will come into its own in the Election.'

Mr Blair met Mr Gerstner in private on December 2, 1999, while the system was being installed - a meeting only admitted by Downing Street last week in a Commons written answer. But officials are still refusing to disclose what what was discussed. The KBE is one of the highest honours given to foreigners. Its very few recipients include Bob Geldof.

Conservative MP James Gray said: 'I am puzzled by the odd coincidence of an IBM subsidiary offering a low-cost system, and a private meeting between the boss of the company and the Prime Minister. Then the American businessman receives an honorary knighthood. It is certainly strange.'

Labour has consistently rewarded supporters with knighthoods - and even peerages for the likes of Lord Drayson and Lord Levy.

Mr Gerstner, 62, has since left IBM and is now chairman of the Carlyle Group, a Washington-based venture capitalist which employs several former political leaders, including John Major. Mr Blair has been tipped to join when he quits as Prime Minister.

Yesterday Mr Gerstner declined to comment, but IBM insisted it had never offered Labour any favours. 'This was a commercial transaction,' said a spokesman. 'IBM has a policy not to make political contributions.'

Downing Street defended the knighthood, claiming that it was handled through the proper channels. A spokesman said: 'IBM employed 20,000 people and was attracting a lot of investment.'