The Labour Party has traditionally received most of its money from the Unions but under Blair's New Labour project, this moved more towards large donations from very wealthy supporters. Very often big donors to parties get honours in the way of either a knighthood with its right to be called "Sir" or, if you are really generous, a peerage with a seat in the House of Lords. The reason given is often "services to politics" and indeed most are very actively involved in their parties. The problem is that ever since Lloyd George solved his party's financial problems early last century by overtly selling these honours, it has been illegal. Blair made the linkagae even more problematic by setting up an independent body to vet party nominations.

All large donation to political parties have to be declared are reported to the Election Commission. This makes subsequent giving of honours difficult if it is seen they are directly linked. Blair's main fundraiser Lord Levy (AKA Lord Cashpoint for his effectiveness in geting big donations and who Blair made a peer shortly after the 1997 election) came up with a scheme. Instead of asking for donations, those who might want an honour in exchange or might be rewarded by one were asked to make a loan to the party. Loans did not have to be declared so the link to the nomination for an honour was disguised. Many of these "loans" however were ones that Labour never expected to have to pay back as they would be converted to donations after the peerage was given. That rather fell through when someone was turned down by the vetting commission and asked where his peerage was.  All this must be treated as allegations as the case is currently under police investigation and prosecutions may well result.

In all this scandal large donors were put off making further gifts to avoid the hint of corruption that they were starting to get. If that were not bad enough, the Independent on Sunday had a piece explaining that repaying the loans is taking up virtually all the current Labour Party income and there is nothing left to fight an election if Brown did want to call one shortly after taking office.

Party insiders say the party does not have enough money to pay back the loans and will have to beg the lenders to give them more time, or convert them into donations.

They say it will have to divert every penny it raises, including from the unions, to repaying the debts and will have no cash left for a general election campaign fund. In 2008, the party will have to make millions of pounds more in loan repayments, including £1m it owes to Barry Townsley who was proposed for a peerage by Tony Blair.

They warn that the cash for honours affair has brought high-value fundraising to a halt because rich donors are now wary of giving to Labour. The state of the party's finances is so bad that it is making drastic cuts, including cancelling this year's spring conference. The National Policy Forum, which helps to formulate party policy, is also cancelling weekends away to save money.

With the Tories posing a renewed threat and already investing resources in target seats, Labour insiders say the need for an election fighting fund is more crucial than ever. They warn that if Gordon Brown wanted to hold a snap election the state of the party's finances is so bad it would not be able to afford it.

The party will this year have to find £9,684,500 to repay loans ­ most of which were secret loans taken without the knowledge of party chiefs.

Blair on Saddam's Execution

Blair has not made many public appearances since returning early from his Florida vacation at an ex pop star's home. Even when pressed to make a statement, he made an imperious refusal:

On his first public appearance since returning from holiday in Miami, the Prime Minister said at a London hospital: "I've decided to talk about health today. I will talk about all those other issues next week but not today." Asked if he thought he should be talking about the execution, he said: "I'll find a way to talk about it, but not today. I want to concentrate on the NHS."

This refusal drew criticism from many quarters including
 Liberal Democrat leader Ming Campbell Gordon Brown commented on it in an interview broadcast Sunday of which more later and Blair finally half issued a statement through a spokeswoman.

Yesterday, Downing Street officials insisted that Mr Blair would comment "at a time of his choosing". But a spokeswoman set out his thoughts for the first time. She said: "We have made it clear he supports the inquiry by the Iraqis and he does believe the manner of the execution was completely wrong."

She added: "This should not lead us to forget the crimes Saddam Hussein and the death of hundreds of thousands of Iraqis."

This failure to comment is a certain sign he has lost the "common touch" he claimed when persuading the Queen to make a statement and lower the flag on Buckingham Palace after Diana's death. It also is eerily reminiscent of the fate of a former Labour Prime Minister "Sunny Jim" Callaghan. He returned from an economic conference in Guardeloupe during 1979, looking tanned and healthy, to a country in the midst of public workers strike where bodies were lying unburied and garbage uncollected. Caught off guard when asked about the strikes Callaghan replied "I don't think other people in the world would share the view [that] there is mounting chaos,". This led to a headline in the pro-Tory Sun newspape "Crisis, What Crisis?" His government fell shortly after and the headline and lack of awareness it implies has haunted the Labour Party ever since as it condemned them to nearly two decades out of power.

Brown Interview

Gordon Brown is increasing his profile in advance of Blair's resignation and is starting to distance himself from Blair. In a wide ranging interview with the BBC on Sunday, he outlined a more independent, less poodle approach to Bush

Mr Brown's interview took the New Year slot previously reserved for party leaders.

He signaled that he would forge a more forthright relationship with President Bush.

He said: "Obviously, people who know me know that I will speak my mind. I will be very frank. The British national interest is what I and my colleagues are about."

But he added: "I think everybody who also knows me knows that I have worked very closely with members of both parties in America over the years."

Acknowledging that there had been errors in Iraq, he said: "I take my full responsibility and I will not shirk it as a member of the Government from the decisions that we took. But I do say that there are lessons to be learned, particularly from what happened immediately after Saddam Hussein [fell from power]."

He pointed towards the withdrawal of at least part of Britain's armed presence in Iraq, insisting: "I believe it is true to say that by the end of the year, there may be thousands less in Iraq than there are now."

He also made an "interesting" comment about Blair.

Mr Brown defended Mr Blair's style of government, often referred to by critics as a "sofa cabinet" where a select group of advisers gather in an informal setting to make decisions.

"I don't accept that, I think that's unfair to Tony Blair who has been a brilliant prime minister and an excellent leader of the Labour Party, and who has taken very brave and difficult decisions on so many occasions for which he should be applauded," Mr Brown said.

Those of you who may remember the classic BBC comedy "Yes Minster" may recall that "brave and difficult" is often a euphamism for "foolhardy and wrong".  The Independent interview also credits Brown having made comments about the Saddam execution with forcing Blair's hand.

Ruth Kelly

Ruth Kelly is currently a Cabinet member as Communities and Local Government Secretary. She took the post in May 2006 as the functions of her new department were relieved from John Prescott, the Deputy Prime Minister. This followed revelations about his sex life and, even more damaging, paparazzi photos of him playing the toff's game of croquet on the lawn of the country house he was given to go with his role. Not the sort of behaviour expected of a brawling ex ship's steward with Old Labour credentials. Image is, you see, everything in today's "People's Party".

Kelly entered Parliament in 1997 as one of "Blair's babes". It looks like she may end up as one of "Blair's boobs". Her post immediately before this one was as Education Secretary. Today's Daily Mirror reveals that she has sent one of her children to a private fee-paying "public" school. This is always contraversial for a Labour politician to do as it clearly implies no confidence in the state system. Some like backbench MP Dianne Abbott make no apology. She plainly stated that schools in her inner London constituency did not provide a good enough eduction for her child and, however regretable, she put the interests of her child first.

Kelly may well have had more sympathy and understanding if it were not for the policies she pushed through while Education Secretary. Normally MPs and ministers' children are considered "off limits" unless, as here, they have a bearing on their parent's stated policies. Kelly is however somewhat in the spotlight already as having the record for bearing 4 children while an MP. Apparently her reason for sending her child to the $30,000 a year boarding school was that he has dyslexia and this school, which prepares children for the entry exams for Eaton and Harrow, very elite Public schools, could provide the education her local state schools could not.  

This is extremely contraversial as Kelly oversaw policies which pushed through as much integrated education as possible. This implies that local mainstream schools must have sufficient provision for children with scpecial educational needs. The only exception to integration is where strong parental preference or lack of facilities in mainstream mean a child attends a "special school". There can be very strong demand for separate facilities. These may be for children with severe special needs (in one case I know, the school celebrates when some children manage to feed themselves before they end their school life - and many die before reaching school leaving age) or for social reasons. There is for example a strong movement for deaf children to attend specialist schools to be in a "signing" community rather than having to rely on lip reading. Any closure of a special school is treated with extreme caution by the parents who worry that proper provision will not be made in the mainstream school. Kelly oversaw the closure of many of the 117 that have closed since Labour came to power. Labour's education manifesto had this to say on special schools:

"It is not for national government to dictate the proper pattern of provision from the centre, but it is essential that provision is adequate in each locality"

Kelly's decision to send her child outside the state sector is a dramatic illustration of the failure of this election promise. It may however not be surprising that the current crop of Labour ministers should have a bias towards the private sector. Blair went to what many consider Scotland's best private school and older children went to a Catholic school which, while within the state sector, has an elitist entry policy. Kelly herself went to the prestigeous Westminster (Public) School.

This is not the first time what would normally be considered Kelly's private life has been questioned as influencing her public role. Last October it was alleged her membership of the Catholic Opus Dei had meant she had delayed legislation on gay equality

The Gay and Lesbian Humanist Association has called for her immediate resignation.

Association secretary George Broadhead said: "There was a strong suspicion when Ruth Kelly was given this job of looking after the interests of the various communities that the present Government has created, that she would not be even-handed as far as lesbian, gay, bisexual and transgender people were concerned.

"We raised the alarm at the time of her appointment that there would be a conflict between her allegiance to an extreme wing of the Catholic Church and her ability to serve the interests of lesbian, gay, bisexual and transgender people fairly. These latest events indicate that she is putting her loyalty to Opus Dei first.

"We fear that Ms Kelly is going to grant large-scale opt-outs for religious groups from these new regulations. The pressure for these opt-outs has come from - among others - the Catholic Church which has been agitating more and more against lesbian, gay, bisexual and transgender rights.

"Lesbian, gay, bisexual and transgender people are getting a raw deal from this woman who should never have been given this sensitive post in the first place considering her membership of Opus Dei."

After that, we now have the controversy of her child's school. If Blair is a lame duck, it looks like Kelly is now a dead parrot.