Steel deal fuels 'corruption' row

Tory Leader Iain Duncan Smith accused Tony Blair of leading a "corrupt" Government today as the Prime Minister was dragged deeper into the "steelgate" scandal dogging Labour.

Indian steel tycoon Lakshmi Mittal admitted paying £125,000 to the party before last year's election - apparently contradicting claims by senior figures that the cash was received after polling.

Mr Mittal said he gave the money on 23 May, two weeks before polling day on 7 June. Published accounts recorded the money being handed over on 26 June, after a month-long gap when party officials checked whether they could accept it.

The earlier date casts fresh doubt on Downing Street's claim that Mr Blair had no knowledge of the donation when he agreed in July to help Mr Mittal seal a £300million business deal in Romania.

Mr Duncan Smith launched a bitter attack on the standards displayed by New Labour, saying: "We've had Formula One and cash for policies, Peter Mandelson's unique approach to the right to buy, passports for donors and now letters to foreign leaders to smooth the path of Labour-supporting contractors.

"Our politics has been corrupted. It has descended into incompetence and cynicism."

Downing Street claims that Mr Blair only agreed to help Mr Mittal because he was asked to do so by civil servants on the recommendation of Britain's ambassador in Bucharest, Richard Ralph.

In a letter to Cabinet Secretary Sir Richard Wilson, Conservative shadow cabinet office minister Tim Collins wrote: "If this is indeed the case I am sure you will be happy to publish the original communications between the Ambassador, the Foreign Office and Downing Street so that the appearance of impropriety can be cleared up."

On 23 July last year, after the deal was agreed but before the contracts were signed, Mr Blair wrote to Romanian prime minister Adrian Nastase urging that the sale should go ahead, and saying he was " particularly pleased that it is a British company which is your partner".

Mr Mittal was already a known Labour backer who had given £16,000 to the party in April 1997. His wife gave money to the election campaigns of disgraced former minister Keith Vaz.

Today Mr Mittal dismissed suggestions that his company had little connection with Britain. Only 100 of his firm's 125,000 staff are understood to be based in the UK but he said: "London has been the main office of the group. All our services come from Britain - lawyers, accountants, financial services. British companies work for us."

He said the company had effectively won the competition to take over Romania's nationalised steelmaker in 2000, long before Mr Blair's letter of support was sent.

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