Why take money from businessmen and then try to hid it?

What have they got to hide? Why do Labour politicians create complex and often illegal conduits to disguise the obvious fact that they get a lot of their money from businessmen? This is the question at the heart of the recent spate of donations scandals involving Wendy Alexander, Peter Hain and others. Invariably, the trouble began, not with the donations themselves, but with the way Labour politicians tried to divert attention from them.

It must surely be only a matter of time before the work and pensions secretary, Peter Hain, stands down. He has had a truly dreadful weekend press, with editorials in almost every paper calling for him to go. We have learned that even members of his own campaign team had urged him to resign after they discovered the existence of the Progressive Policy Forum. This “think tank” has no website or publications to its name and seems to think about very little except how to attract large, covert donations from diamond dealers and other colourful business interests.

If Hain’s own people think he is toast, it seems hardly likely that a Prime Minister who is tumbling in the opinion polls is going to stick by him through thick and thin. Brown has no great affection for “Hain the pain” and only kept him in the tent because he feared he might become a focus for left wing dissent. But Labour backbenchers are no great enthusiasts for the former Young Liberal either, as his poor showing in the deputy leadership election demonstrated.

Brown is going to have to draw a line under this donations row eventually, and Hain seems to have drawn it for him. Tony Blair was utterly ruthless with even his closest political friends when they got into money trouble - as evidenced by the twice-sacked Peter Mandelson. If Brown doesn’t do something now, people will start saying that he is so weak that he can’t dispense with an expendable minister. Some are already saying it.

The difference between Hain’s situation and that of Wendy Alexander is that Hain hadn’t actually broken the law by setting up the PPF to channel business funds. Indeed, most of his donations would have been legal had he actually got round to declaring them. Somehow a hundred thousand pounds worth just slipped through the net. Well, its easily done.

These sums dwarf Bendy Wendy’s fund-raising endeavours. But as we all know, Ms Alexander broke the law by accepting money from a tax exile, thanking him for it, and then not returning it within 30 days. She has pleaded innocence on the grounds of ignorance, and the Electoral Commission seems to have accepted this - though whether the court of public opinion will as lenient is another matter.

This was supposed to be the week the Scottish Labour leader fought back. Fully expecting to be exonerated she was planning to seize the constitutional initiative and move on. But it was not to be. Suddenly, all the talk is of dodgy donations again and once again the press are testing for shoogles on Wendy’s coat peg. If Peter Hain goes, she may not be far behind.

In both cases, the trouble arose from their attempts to disguise or distance themselves from their financial relations with businessmen. Team Wendy used devices like “995s” - getting their property developer friends to donate funds of just under the £1,000 threshold for disclosure. And by misrepresenting the source of the cash as coming from third parties. The Electoral Commission was wrongly informed that the illegal donation from the Jersey businessman Paul Green had come from a UK company CPS. Hain’s PPF also served to ‘launder’ cash by recycling it through an independent “think tank”.

Last month the Times revealed how one of Labour’s largest donors, the Glasgow businessman, Imran Khand, was able to secretly channel more than £300,000 through an Islamic lobby group, Muslim Friends of Labour, run by the Labour MP Mohammad Sarwar. The Northern Property developer, David Abrahams, was invited to channel £650,000 anonymously to Labour through a series of proxies, or intermediaries, some of whom didn’t even know they were Labour donors. The police are still investigating.

Further back, the cash for honours affair was also rooted in Labour’s sensitivity about its new reliance on business cash. Millionaires like were urged by Labour fund-raisers not to donate at all, but to give loans to the party in order to get round the disclosure rules. But you have to ask: why not save the hassle and be frank about it?

Well, at least part of the answer is that Labour politicians like Wendy Alexander, Peter Hain, Harriet Harman present themselves as tribunes of the people, as guardians of the underdog. Yesterday, on her first interview since the donor scandal broke Wendy Alexander insisted that she had come into politics to help the disadvantaged, lone parents, battered wives. As socialists they are all profoundly uneasy about having to rely on the largesse of capitalists.

They are also morally uneasy because they know that businessmen aren’t stupid: they haven’t become rich by throwing money around. Donating to politicians is all about influence - about buying into the inner circles of decision-making. A measure of just how important this influence is to business is the huge sum being paid to Tony Blair - someone who knows little about investment banking - by the Wall St bank, JP Morgan. He is to receive £500,000 - £2,000,000 according to the Daily Telegraph - for a part time job which which will apparently be conducted largely by telephone.

Politics has become so debased that we no longer seem to be surprised when politicians sell themselves to the highest bidder. Remember, Tony Blair carries into JP Morgan a great deal of highly market-sensitive information about government financial policy, about PFI deals, future privatisations, arms deals. Also about relations with foreign countries like Iraq, in which JP Morgan has a direct interest as the bank of reconstruction. They are buying the inside track, and it is money well spent.

Now, of course, businessmen can’t hand cash directly to politicians while they are in office, but they can hand money to their campaigns, which amounts to the same thing. This cash can buy high office, and power, which holds its own rewards to ambitious politicians, but which can also ensure a comfortable retirement - as former Labour ministers like Brian Wilson and George Robertson have demonstrated by securing positions in in the private sector after leaving politics.

The individual sums involved in donations may sometimes appear to be trivial, as in Wendy Alexander’s case, but that actually isn’t really the point. By cultivating these links, and trying to hush them up, the damage is already done to their probity. Worse, they have broken the zero-tolerance laws and codes which were designed by their own party to stamp out sleaze. Which is why both Wendy Alexander and Peter Hain are now damaged goods - even if they cling onto their jobs.