Global Policy Forum

By George Jones

THE collapse of the American energy company Enron threatened last night to engulf Labour in a "cash for access" scandal. Opposition politicians demanded an inquiry into the Government's dealings with the failed company and its auditors, Arthur Andersen.

Downing Street denied any impropriety, insisting that a series of meetings between Enron executives and ministers since Labour came to power had been part of the normal business of government. But Tory and Liberal Democrat MPs claimed that Enron contributed £36,000 to the Labour Party around the time the Government took key decisions over energy policy and the decision not to refer Enron's 1998 purchase of Wessex Water to the Monopolies and Mergers Commission.

Both moves benefited Enron, which was once valued at £50 billion. The company filed for bankruptcy on Dec 2 and the American justice department has opened a criminal investigation, with some Enron officials suspected of fraud.

Downing Street's nervousness was demonstrated by its decision to make public a detailed list of ministerial contacts with Enron. Officials launched a concerted damage limitation exercise to counter accusations that the company's contributions had ensured privileged access to ministers. The Tories claimed that the alleged links between Labour and Enron could dwarf the sleaze rows of John Major's government.

A Labour spokesman said that Enron had made no formal donations to the party, although its European division was understood to have contributed £36,000 between 1997-2000 through buying tables at Labour dinners and sponsoring a party conference reception in 1998. Ralph Hodge, the former chairman of Enron Europe, was quoted at the weekend as saying that the firm felt it had to give money to Labour to meet Cabinet ministers. "Sponsorship and donations are the most efficient ways of getting access", he claimed.

Tim Collins, the Conservative vice-chairman, said the decisions on Wessex Water and the lifting in 2000 of the Government's moratorium on the building of new gas-fired power stations, were made after Enron made what he termed "significant donations" to Labour. Mr Collins told Radio 4's World at One programme: "It is a cash for access problem and it is on a scale which dwarfs some of the problems of past administrations."

The Conservatives called for separate investigations by Sir Richard Wilson, the Cabinet Secretary, and the committee on standards in public life.

Mr Collins said that any inquiry should cover the role of Jonathan Powell, Tony Blair's chief of staff, in deciding who gained access to the Prime Minister, because before he entered government he was involved in party fund-raising. David Davis, the Conservative Party chairman, called on Mr Blair to make clear how the decision to abandon a moratorium on gas-fired power stations was made. It was a Labour manifesto commitment, but was dropped in November 2000 after two years. Downing Street insisted last night that at the time the Government had made clear it was only a temporary curb, aimed at removing distortions in the energy market.

However, documents released under the US freedom of information Act two years ago alleged that Mr Blair had intervened to water down the moratorium proposals.

Matthew Taylor, the Liberal Democrat Treasury spokesman, called for an inquiry by the Commons' public administration committee into Labour's links with Enron. "We know that in the United States Enron used extensive political contacts to seek to further its interests and there is good evidence of the same happening here," he said.

A Labour Party spokesman described the allegations as "completely without foundation". It was a matter of public record in the party's accounts that Enron Europe had bought tickets for dinners and sponsored one event. The last event it attended was in April 2000.

Mr Blair's spokesman said the Government would "refute absolutely" that there has been any impropriety. Enron representatives had met Peter Mandelson and Stephen Byers at Trade and John Battle and Helen Liddell and Industry, but at some meetings they were there with representatives of other companies. There had been no official meetings with Mr Blair.

The Government also came under pressure to explain the extent of its links with Arthur Andersen. Andersen established close links with Labour while it was in Opposition before 1997. Since then it has been closely involved in preparations for public-private partnerships and advised on a number of projects, including the Millennium Dome.

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