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No 1074 30th January 2001

Both Mandelson camps, sympathetic or hostile, miss the real point in the biggest cover-up of all. New Labourism is what is rotten, and its embrace of capitalism is what is bringing it down. But the despised sacrifice perfectly symbolises everyone's incoherent frustration which is so unnerving that even the polite media cannot avoid a homophobic jibe or two. World-crisis tension, sparking off the 'boot the oddballs' Rasputin effect, drives 'politically-correct' fake-"leftism" further into the wilderness. Brutal character-assassination of Mandelson means that capitalist-survival recriminations are taking over from cross-class petty-bourgeois moralising. The whole of New Labour is mired in defective sleaze, not just its gay-mafia leadership. Degenerate establishment vengeance sheds more light on the real class-war issues ahead than the entire socialist press combined.

The scapegoating of Mandelson (and his threatened revenge) because of servility to big business, - which is the hallmark of the whole Blairite phenomenon and not just its chief propagandist, is in fact just the well-disguised tip of the iceberg of a monumental historic political and economic crisis for the very survival of British imperialism's position in the world.

The real story is nothing to do with speeded-up passports for dodgy Indian businessmen on the run from the law in their own country, - they were friends to the whole British political establishment – but about the bourgeois ideological delusion that capitalism can survive any crisis as long as the way it is presented is sound and as long as the right diversions are found.

Selecting a fallguy, a normal routine, in this sort of bourgeois intrigue, picked on Mandelson and was done in a panic because there is now constant fear in Whitehall of the whole bogus 'success' of Great Britain, PLC, unravelling almost at any moment with catastrophic consequences. Mandelson was stabbed in the back at this time because a) public anger at moneyed corruption is growing rapidly as the slump's stormclouds gather, and some pretend 'cleansing' is needed; b) he was an unfortunate target for some current anti-sleaze press inquiries about dubious Hinduja links to high government office and to public scandal issues like the Dome, just one of scores of different stories about big business corruption and New Labour; c) ironically Mandelson himself was the public face of Blairite spin-doctoring, and how better to cover up such a major stunt as token ministerial sacking than by sacrificing the propaganda minister himself; d) his own cynical readiness to stab any of his colleagues and rivals in the back and his deadly ability (through a media gay mafia) to undermine them publicly made him more feared than ever at a time of rapidly-deepening political and economic crisis when almost any dramatic upheaval conceivable could become a possibility; e) in the fraught period of coming turmoil when all kinds of prejudices could become major political factors, a bit of lighthearted populist homophobia might be seen as a cunning ploy for the New Labour gay mafia to throw to the media as a diversion.

The enthusiastic personal ridicule of Mandelson's campness that this drew from even the most politically-correct of the 'responsible' media proves what a well-timed and cleverly-judged stunt this was. Even Radio 4's 'Thought for the day' this morning had the preacher hissing in despair at how the press was dominated by the gay fall-out bitchiness emanating from government circles. "Who cares who is shafting who in the Cabinet when the whole starving Third World is just being ignored" the man sermonised. Quite right, vicar. And the clergy should know.

But ridicule of this kind will become normal and unstoppable, and PC objections are just helping Blair's diversion be obscured with yet another diversion, - PC.

Derision of an arrogant government in trouble, and vilification of a particularly hated minister, are being deliberately muddled by fake-'left' petty bourgeois sentiments which have no stomach for real class war.

It is utterly irrelevant that some populist/Tory tabloid scorn for Mandelson and his fast-track naturalisation swindle for some Indian graft-tycoons has shown little delicate concern to avoid charges of anti-semitism, xenophobia, and homophobia.

It is equally barmy for politically-correct social-democracy influences to try to get the public to miss the point about New Labour's turmoil by peddling the insane notion that 'Blair has been misled' in the course of these astonishing antics, or by the daft diversion about whether 'Mandelson can be considered as bad as Jonathan Aitken at lying', (the last great Tory resignation scandal), - two stunts the Observer PC rearguard tried in an attempts to soften that paper's hard-news exposure of Blairite degeneracy.

And even as sections of the capitalist press succeed in grasping the bigger picture,- that this humiliating setback for Blairism is a larger political problem than just the sum of its rotten parts (lies & evasions; schadenfreude; vengeful back-stabbing; opportunist arrogance; sleazy hubris; etc), - they nevertheless miss the bigger picture still of a whole system of capitalist government in crisis, with these New Labour pratfalls merely the symptoms of bewildered helplessness and rancid recriminations about a whole lot worse going wrong than just the shaming of 'parliamentary honour' (a non-existent nonsense anyway).

What makes no sense at all is that this huge bust-up inside New Labour and between the official government of British imperialism and its normally servile capitalist press (previously crawling with pro-Blair toadies) is just over some insignificant brief phone-message three years ago which a senior minister is happy to admit he made if he could only remember it, or have it confirmed by the records,(as part of the confused and terrified BBC hierarchy were still trying to pretend for 5 long minutes on Monday morning this week on the crucial political arena, Radio 4's hopelessly reactionary Today programme, broadcasting a ludicrous repeat performance (via a friend) of Mandelson's boring and irrelevant tale about his supposed memory lapse and how he was persuaded to resign honourably over something which he later realised he had not even been guilty of in the first place. This puerile fairytale would disgrace Children’s Hour.)

The sheer dimensions of the media furore; the venom with which the graft aspect (a speeded-up naturalisation process in return for pro-Labour gifts and fund-raising) is being pursued by the press against no less than six Cabinet Ministers, as many junior ministers, and several times as many Labour MPs; and the astonishing way in which the New Labour leaders have been clobbering each other in public; - all confirm the EPSR's conclusions from the remarkable demonstration last September in the fuel-blockade crisis, of signs of a collapse in government ability to even posture any more about its 'understanding, firmness, farsightedness, propaganda mastery, and general grip on events'. All competence and style, and all shallow popularity, - all of them paper-thin to start with, - suddenly evaporated. The ridiculous illusions about Blairite 'confidence, wisdom, and ability in government' have been looking less and less convincing ever since. Now this farcical resignation mess underlines what a disgusting bunch of superficial chancers these 'saviours of the capitalist system' really are.

Regardless of how unconsciously some of these ludicrously inflated egos may be acting in their bad behaviour, this amount of demented and suicidal conduct only makes sense as a reflection of the nerve-jangling, spirit-crushing difficulties of what New Labour is supposed to exist for in the first place, - to modernise and revive British capitalist society towards unprecedented new heights of flourishing. The whole project has obviously not just gone very badly wrong; the whole project of British capitalism itself is obviously facing nothing less than the greatest possible historical catastrophe, - namely total collapse and extinction in worldwide economic crash and all-out vicious trade-war. And these can be merely the first disastrous steps backward by the total finance-capital anarchy known as the 'free market' to get out of its insane supposed 'over-production' crisis from alleged 'surplus' investment in every field of commerce (meaning not 'too many goods' for the world's starving billions, an impossibility, but too few profits being sweated out of exploited labour to satisfy all the greedy demands of all the rival capital-investment owners.)

This New Labour government, - and its previously subservient capitalist press, along with its equally docile permanent civil service, - obviously all know something absolutely terrifying and appalling about the devastating economic hardships that the international imperialist crisis is shortly going to inflict on the whole of industry and business in Britain, and on people's living standards. Understanding as they do that the whole pretence of effective government will soon be over, and that the present pap-fed quiescent public will shortly have vanished for ever, these various elements of a dumbfounded and panic-stricken British imperialist establishment are all now already sniping at each other with vicious recriminations even before the details are yet clear of exactly how they are all going to fail and succumb to economic disaster, or even what their desperate emergency political tasks will be (to keep the lid on things) which they likewise expect to fail at.

This weird hiccup, revealing just pettifogging mindlessness, crashing incompetence, and self-inflicted damage at the heart of 'good government' in Britain, - is a foretaste of the absolute uselessness and treacherous unpleasantness that will be all that British capitalist society will be able to muster when the disasters and stupidities of world economic slump really start.

The best witnesses for this incubating debacle are the capitalist press comments themselves, calmly, almost casually, accepting the 'Rasputin factor' in the case, - (another supposedly emotionally flawed genius whose unorthodox antics and allegedly bewitching charm were likewise first tolerated by some Russian establishment elements as their salvation but then hurriedly and brutally got rid of when the unstable emotional extremism was understood (even by the dimwittedness all around) as more reflecting Russian aristocratic society's sterile hopelessness than any 'solution' to its problems.)

Many comments, even in the 'respectable' capitalist press (a contradiction in terms) like the Times and the Guardian, have been rattled enough by the disturbing fragility of their capitalism's "government" that the sanctity of politically-correct anti-homophobia has had to be infringed (but in the best possible taste, of course), in the way that some of the tabloids have more raucously done before. The bourgeoisie know all about self-protecting freemasonries being formed here, there, and everywhere within capitalism. Self-promoting homosexual mafias have long been tolerated in various important state institutions, the BBC being the most notorious. But now that the gloss is wearing off these undoubtedly relatively brilliant and driven individuals (compared to the demoralised and paralysed bourgeois norm at this twilight of British imperialism) who effortlessly rise to the top and supply some of the leadership that is lacking, but who nevertheless can never be the 'salvation' of the now-defective bourgeois-individualist world itself, only its symbol, – then suspicions of an emotionally-flawed such gay mafia are bound to spread, PC or no PC.

The Guardian kicked off, commissioning presumably another homosexual to write: It's a gay thing, which included the following, making play of all the Fleet Street innuendoes that the whole New Labour leadership, led by Blair and Brown, have a tortured, queer, emotional connection before a political one:

"It takes one - truistically - to know one and I'm afraid he could not have been queenier if he tried. The tousled locks, the quivering lower lip, the nostrils poised to flare; all signalled gay at bay. This was a camp High Noon. But it was that "fuck you" look in the eyes that compelled as he looked into the cruel lens - for there one saw contempt for the spirits he had conjured out of the media shallows.

The heterosexual commentating heavies miss the Mandelson point. Which is why they're bemused by the folly of the telephone call on the wild side, the silly daring of that two-minute surrender of judgment. What Peter Mandelson did was the political equivalent of bare-backing. And as with all such discovered episodes of unprotected sex, it's the presumption of further unrevealed audacity which thrills both voyeur and victim. How many other times did he do it? Whether his departure makes the euro more or less likely really seems rather boring by comparison.

New Labour - the provisional arrangement he fathered looks strangely passé as Labour finally settles in as a government. No - Peter Mandelson's real significance is other. This is a gay thing - the story of a man who politically was once one man's bitch and then became another's.

The Mandelson manner and appearance (arch, equivocal, layered in suggestive meaning), was a historically specific product. It came from the gender-bendering 80s when there was enough liberation around to step outside the closet, but not enough for the orthodox careerist to swing the door behind him.

Older gays, such as the travel writer Gavin Young who died earlier this month, arrived at a different accommodation with the genes. Enjoying the homosexuality traditional among Arabists of his class and generation, Gavin travelled for it.

He was an old-school masculine gay, the kind who embraced physical toughness in travel as an affirmation of character. No "fem" he.

Most schools have a PE teacher or two who, liking "lads who keep themselves fit", are rather similar.

The interim ethics of Mandy-gaydom seems a sadder thing. The fact that he never acknowledged his gayness only confirmed a reputation for deceit.

As the most famous gay man in Britain he was a cardboard cut-out figure, the political Village People's Machiavelli, a parody of the gay man as the shifty fudge-packer in the corner. He had fed meat in his time to the political vultures of the Sun and the Daily Mail. But Mandy-gayness also suited their caricaturing homophobic purposes.

The party he chose found him exotic - which says more about that party's Methodist dullness than it does about the Hendon boy. Chris Smith and Nick Brown show how in New Labour even the gay men are strait-laced. Old Labour had a brave stab at it all with Tom Driberg - a cruiser of ocean-going capacity but there have been no worthy successors to that prodigy of the cottage epiphanies. That Tories are camper is a law of British politics. But campery is the carapace of repression put in place to release what might otherwise be anarchic.

Cod psychology tries to explain the gay fascination with politics as a question of tatty operetta charms, charged emotions and episodic fits of drama, of quarrels and reconciliations. The queeny stereotype is pre-“post-gay”.

But politics appeals to gay men for two reasons, both of them dangerous. Like sex, religion and drugs, politics seems to confirm the self. It gives it a platform of heightened self-importance. But all four are also an escape from the burdensome real self, the one you have to deal with on a daily basis. Their dangerous attraction is the offer of absorption in something greater.

Political groupings are often substitute families for gay politicians – hence the virulence of the squabbling. They minister to the need to belong – even when, as in Mandelson's case, the herd mind rejects.

It's not just a gay thing. Politics attracts chancers of all kinds. But when it comes to gay identity there's a double discharge of drama. Here the sexual is the political. Hence the flight to the common and the race to the heath. At some level there is actually a desire to be found out. Mandelson's call was both exploitation of office and a challenge to be discovered in an amoral world. He was gagging for it. Hence Pink Wednesday.

Equivocal interim gaydom both made and unmade Peter Mandelson. "Don't forget dear" said an elderly theatrical dresser to me once, "we queens have all the talent.” The 20th century was certainly the age of the gay artist, Proust, Musil, Mann, Auden, Wittgenstein: Frustration is good for art and as gay gets mainstream, so the art dwindles. Armistead Maupin seems a limping companion to the pink giants of old. But the dresser's counsel was always a silly consolation - though kindly meant, it came from a time of marginalisation and there was a pathos in the conceit.

Mandelson's lonely sadness is that he believed in a unique talent to deceive. He was the man of the gay interim ethic - period which is passing. As the arch-exponent of that ethic, Joe Orton, puts it in Loot: "We wouldn't have been nicked if you'd kept your mouth shut. Making us look ridiculous by telling the truth. Why can't you lie like a normal man?"

But Mandelsonian deception was caught in the web spun by its own time and condition.

The Times was slightly less frank, but at the same time more blunt and scientific about how the emotional had become the political, roping in all Blair's entourage, and implying Gordon Brown's homosexuality too, a longstanding national-press innuendo:

It was the morning after a tense night in the run-up to the last election. Tony and Peter had had a tiff, and sharp words were exchanged. "If he says that to me again," Peter confided to a friend the following day, "I'll stop loving him."

There was more than an element of camp humour in Mandelson's choice of words. But there was also a core of truth. The relationship between Tony Blair and Peter Mandelson has always been one based on deep emotional connection, not just political comradeship.

I once wrote that the "love triangle" between Messrs Blair, Brown and Mandelson reminded me more of the passionate and volatile friendships that girls form at boarding school than the laddish, matey camaraderie that boys tend to go in for. Apart from Alastair Campbell, a lad par excellence, the intimate circle around the Prime Minister consists either of women - Cherie, Anji Hunter, Sally Morgan, Fiona Millar - or of intuitive, sensitive and emotional men, such as Mandelson, Gordon Brown, Philip Gould and, to some extent, David Miliband.

The result is a highly charged atmosphere in which members of the team compete for the leader's affection and in which the close bonds between the team members are sometimes frayed by the intensity of their rivalry.

But if it were a simple case of courtiers vying for the love and attention of the king, it would be easier to understand and assess. What makes it more complicated is that two of the courtiers have believed that they were in some way superior to the king and that he needed them as much as - or more than - they needed him.

We all know that it was Mandelson who picked out and nurtured the young Blair.

From then on, it was Mandelson who provided the style and Brown the substance of Blair's political career. All leaders need their counsellors, particularly those who have been propelled so suddenly and unexpectedly to the top. So it was not surprising that Blair leant as heavily as he did on these two talented men. But Mandelson adored - and sometimes abused - the power that this relationship gave him.

Whether consciously or not, he sought to prolong and deepen the dependency by undermining Blair's confidence in himself. One vignette springs to mind. Before the last election, the Labour leader was psyching himself up for a big speech, pacing the dressing-room, mentally rehearsing the occasion. Mandelson came up to him, flicked his tie and said, in a despairing tone. "Tie, Tony, tie", neatly pricking the bubble of self-possession that Blair had just managed to build.

During the campaign itself, Blair made two phone calls every morning before embarking on the day: one to Mandelson, the other to Lord Irvine of Lairg, his former pupil-master. It was as if he needed his regular fix.

But if this has been a relationship of co-dependency, it has been remarkably symmetrical. For Mandelson needed Blair, too. It was the new Labour leader who, during his leadership campaign, brought the spin-meister back from the exile to which John Smith had consigned him. It was Blair who gave him two wonderful ministerial jobs before his first demise, then a second chance just months later. Because he had made so many enemies among his colleagues, most markedly with Brown, he was totally dependent on his leader's patronage. If Blair went, he went; if Blair decided to sack him, no one else would stand up for him.

Mandelson's miscalculation was to believe that his position was unassailable, that he was as fireproof as today's foam-filled furniture. He wrongly thought that the Prime Minister's dependence on him allowed him to exercise power without responsibility: the responsibility to behave as scrupulously as others.

In fact, his two lapses of behaviour broke the bonds of trust that are critical in such an intimate relationship. Blair and his inner circle were livid that Mandelson had not told them of his loan from Geoffrey Robinson. "The reason he did not ask us if he could accept the money was because he knew deep down that it was wrong, and that Tony would say no," recalls one insider.

After that incident. the Prime Minister hoped that Mandelson would be chastened enough not to re-offend. He was wrong, and it was a lapse of judgment to rehabilitate his friend so quickly and leniently.

But, in matters of relationships, he is a conservative man, preferring the company of those he has known a long time. He is one of those bosses who dreads the departure of a trusted executive, although when it happens, the event often turns out to be less traumatic than he feared. For instance, he did not know how he would manage without his private secretary, John Holmes. As it transpired, the transition went smoothly, and in some ways he even benefited from the fresh air blown in with a new appointee.

Might Mandelson's departure presage the unravelling of that close-knit group, many of whom have worked for him since long before he became leader? Campbell looks as if he has lost his appetite for the job - not surprisingly, given that he probably gets to see more of the Blair children than he does his own. I cannot imagine David Miliband or Anji Hunter wanting to serve another full term of gruelling Downing Street penance.

So perhaps this episode will turn out to mark the beginning of a new phase in Blair's life. He will need to recruit advisers who share none of the history of new Labour's making. They will feel none of the intimacy born of years fighting together in Opposition. They may, however, bring a new maturity with them. After the next election, Downing Street could start to look more like a collection of colleagues working to a common end than a tempestuous girl band whose lives are punctuated by fallouts, recriminations and, in the end, splits.

 

The truth about the Blair court is, as the Prime Minister himself once remarked to Peter Mandelson, "we are not characters in some Greek tragedy". No, they are characters out of a Hollywood highschool bitchfest. The story of this Government is not Medea but Clueless or Ten things I hate about you. The Blairites embody all the emotional instability of adolescence without any of its naïve charm.

And it has been apparent from the beginning. You can see it in the letters Mandelson wrote to Blair and allowed his biographer to publish, where he proclaims: "I am always thinking of you. I will do anything you ask of me. But we have to face up to the fact that we cannot go on like this." That same half-passionate, half-peevish, altogether teenage, tone is there to Mandelson's tear-stained first resignation letter, when he began: "I can scarcely believe I am writing this..." It might as well have borne SWALK on the envelope.

The same playground morality came to the fore in Blair's petulant defence of his friend at Prime Minister's Questions last Wednesday, when he called Mandelson "a bigger man than any of his critics". And the curious code of the fourth-form was apparent also in Campbell's invitation to Mandelson to kiss and make up at a family party on Saturday night after their catfight. "Peter is, and will remain a good friend of mine," remarked Campbell. Now let's all hug. Ooh, did I scratch you? Well, hush my mouth.

The whole spectacle of Mandelson's resignation, from his confession that he did not focus on the Hinduja passport scandal because he was looking at "Asiatic art" in a Paris museum to the comparison between him and Ron Davies acknowledged by Campbell, would, indeed, be richly comic if this were just a spat between Alicia Silverstone and Winona Ryder. But it's not that innocent.

These people, gabbling, bitching, attention-seeking Oprah-cases to a man, have been running the country. And doing so in a manner which, it is now revealed once more, casts the gravest doubt on their judgment, probity and ethics. We know, from a previous leaked memo of Blair's, that all these breathless policy launches are nothing to do with humble public service and everything to do with "eye-catching initiatives with which I can be personally associated". And we know that the reason Mandelson went, came back, and went again is that in his inherently unstable, relentlessly superficial, image-obsessed, spin-driven, dodgily mortgaged soul he embodied the "irreducible core" of Blairism.

Tony Blair can no more cut himself off from the spirit of Mandelson than Faustus could reclaim his soul from Mephistopheles. The last week matters because it confirms the character of the people who govern us.

They are men who think the ordinary rules which bind lesser mortals do not apply to them.

We now know that Tony Blair thinks there is nothing wrong in his ministers acting as procurers for S.P Hinduja's passport even as Mr Hinduja was giving money to a new Labour prestige project. We now know that Mandelson felt there was nothing wrong with getting his civil servants to work as immigration advisers for Mr Hinduja. We now know that when scrutiny started, he tried to alter a parliamentary answer six times to keep his name out. We now know that Keith Vaz was happy to provide references for people he scarcely knew, happy to append his name to letters written for him by the Hindujas and happy to use his position in the Foreign Office to favour them with advice in their corruption case. As Alastair Campbell's fellow Burnley fans might put it: They're bold, they're bent, their signatures are up for rent, new Labour, new Labour.

One straight man in the New Labour follies, chief propagandist Campbell, seemed to be encouraging the press to put the emphasis on Mandelson's queer emotional instability:

WAR BROKE out last night between Tony Blair and Peter Mandelson, the two key architects of the New Labour project, as the crisis over the passports-for-favours scandal threatened to plunge the Government into chaos just months before a general election.

The Prime Minister's officials and his former close confidant traded bitter attacks as the recriminations intensified following Mandelson's sacking last week for failing to tell the truth about his role in an Indian tycoon's passport application.

The row erupted after senior Downing Street sources were authorised on Friday to tell The Observer that Mandelson was 'unfocused' and 'detached', suggesting he had a problem with his state of mind in recent weeks and that his 'unusual' behaviour ahead of his sacking last week had been noticed by key figures in Blair's administration.

The Downing Street source said Mandelson had lost his 'rapier-like' attention to detail and his mind often seemed to be elsewhere. He signalled that Mandelson was no longer viewed as a leading thinker in New Labour and that it was time for him to take a break.

'He did not have the normal focus,' the official said. 'He's been a little bit like that for a while. He's fed up with it. He's kind of had enough.'

Alastair Campbell, the Prime Minister's official spokesman, later added to the controversy when he briefed Sunday lobby journalists. 'Part of the problem, and Peter would accept this, I think, is that there were things that Peter cannot explain, and cannot explain to himself,' Campbell said. 'I think he has been slightly detached.'

Asked if Mandelson's mental condition was similar to that of Ron Davies, who resigned after an encounter on Clapham Common in 1998, Campbell replied: 'I think it was.'

Mandelson, furious about the way he was being portrayed, agreed to write an article for today's Sunday Times, in which he said he was not prepared to 'go quietly' and indicated that he felt he had been forced out after being summoned to attend a 'kangaroo court' with Blair last week.

He added: 'What I did do was make the mistake of speaking out before establishing all the facts and rushing into last-minute interviews. This relatively trivial error was turned into a huge misjudgment that led to my resignation.'

In a detailed rebuttal, he went on: 'For the first, and I hope for the last time in my life, the fight suddenly went out of me. I felt isolated. I knew I hadn't done anything wrong, but I had not time to prove it.'

Some Observer comments took the hint and embroidered all the gay triangle analogies and innuendoes almost to exhaustion:

One of the explanations for Blair's dependency on Mandelson was that he prized him as a large personality, one of the few strong enough to help counterbalance Gordon Brown. The smashing of the original New Labour love triangle simplifies the relationship between the neighbours of Downing Street. No longer will Gordon Brown's paranoid streak be inflamed by the thought that when his early morning phone call to Tony is over, the next person on the line to the Prime Minister will be his hated rival for the ear of Blair.

TO MANDELSON - and often, though not always, rightly - the Brownites attributed the inspiration for every disobliging reference to the Chancellor in the media. After one burst of infighting between the pair early last year, Mandelson told one friend that he should put a notice up on his desk: 'Remember: Gordon is mad.' Much as Tony Blair frequently bemoaned their incessant feuding, much as he pleaded with both men to bury the hatchet, at some deeply subconscious level it seems to have served him. Peter Mandelson's own theory was that Brown's hatred of him was a displacement of his ferocious resentment at Blair for snatching the crown of leadership which the Chancellor believes should have been his. Though evidently a self serving bit of psychoanalysis, which conveniently neglected his own tendency to aggravate things, this has the ring of some truth.

The removal of the third person in their marriage simplifies the Blair Brown relationship: for better, so long as it remains relatively calm, perhaps for worse, when their eruptions can no longer be blamed on someone else. Gordon Brown would not be the acute strategist he is if he did not use his now untrammelled command over the election campaign to mark his claim to become Prime Minister. The Chancellor will want his stewardship of the economy and his campaign to receive the lion's credit for securing the second term. Those who try to protect Tony Blair's interests will be anxious that the Prime Minister's contribution is not entirely neglected. Brownite joy is unconfined not simply because the hate object has been immolated. In the complex balance of power between them, the seesaw has tilted to the Chancellor at the expense of the Prime Minister. As he drains the toxic dregs of the cocktail of ironies that finished him, perhaps it will be this bitter taste that lingers longest on the tongue of Peter Mandelson. Sacked by his old friend Tony Blair, his fall strengthens no one more than his ancient enemy, Gordon Brown.

The Times followed up with a useful straightforward medical briefing on the psychological advantages (for a system in trouble) of someone with Mandelson's drive to stand out, but also the emotional drawbacks:

Mr Mandelson's personality - at least in as far as one can judge from his public behaviour - fits into cluster B, the group which includes antisocial, histrionic and narcissistic personalities.

It is men and women of the cluster B personality disorders who are all too often those who succeed and who will later crowd together, not always amicably, on the green benches of the House of Commons, will dominate the senior messes in the Armed Forces and control boardrooms. In the past, they created the British Empire.

Society may not always like them, but it needs people like this.

Such people are prepared to exploit others, to plot and plan and to work all hours of the day and night to advance their chosen causes so that favoured institutions, and they with them, will become powerful, controlling and successful.

They crave respect rather than love, and although often admired, few are personally popular. They may, although surrounded by acquaintances, be almost friendless. Above all, they loathe humiliation.

Mr Mandelson's character - as displayed in public, on the media and in his own writing and as described by his biographers - is characterised by, as a standard textbook writes, "a pervasive pattern of grandiosity, hypersensitivity to the evaluation of others, and a lack of empathy".

One of the salient features of this disorder is that those who have it react to criticism or humiliation with feelings of rage, shame and oppression.

It is little wonder that Mr Mandelson, already over-tired by commuting to Northern Ireland, harried over his private life and enraged by the blame heaped on his shoulders for the failure of the Dome, should be pushed to resignation when challenged over the ethics of his possible involvement in Srichand Hinduja's passport application.

People with what could be termed a Mandelson personality - for want of a better non-pejorative description - have an exaggerated sense of their importance and tend to overstate their achievements.

They expect to receive special treatment as a reward for, as they see it, their special contribution. Not for them the long wait in the queue, and a restaurant table by the kitchen door. They have a fundamental belief that they have the right to be served first, efficiently, and at the best table by the window.

People with grandiose personality disorders fantasise about having unlimited power. They think of themselves as being very special, if not unique, and they therefore seek the company of others who have excelled in different walks of life or who are also socially and financially powerful.

Hence their desire to be at all the best parties so that they may socialise with people they believe to be their equals.

It has been suggested that some of their success in life is based on their ability to lie more readily than other people. Certainly people with cluster B personality disorders will occasionally twist the truth to their own advantage, but there is a subtle difference between political spinning, and lying and fantasising.

It would be true to character that Mr Mandelson would not be able to remember details of his communication with Mike O'Brien two and a half years ago, but would be able to remember every detail of his loan from Geoffrey Robinson. Houses are important to people who are self-important, because they are one of the props which can support a fundamentally insecure personality.

A depressed and humiliated Mr Mandelson is likely to turn in fury on his persecutors, who have used this latest apparent lapse of memory as an opportunity to denigrate him and to retaliate for a host of arrogant insults in the past.

Mr Mandelson, a loose but fully loaded cannon, freed from the bonds of political friendship and the obligations of loyalty, is likely to inflict heavy casualties in the political battles ahead.

It would have perhaps been better all round, both politically and medically, if there had been a much clearer lapse in Mr Mandelson's memory and if his resignation had been greeted with regret and understanding rather than the humiliating joy and triumph with which it was received.

All round, the capitalist 'respectable' press seem to be edging towards the conclusion that a homosexual emotional disorder can be a) exceptionally dynamic compared to politically-stodgy bourgeois normality but b) hopelessly emotionally flawed; and c) noteworthily politically dangerous when inevitably eventually double-crossed. Well ahead of bourgeois critical realism, the EPSR made similar points when deriding the New Labour government in 1998 for its ludicrous cover-up of the grotesque sexual-emotional instability of the Secretary of State for Wales, the notorious men's public lavatories cruiser Ron Davies, who got government approval to deny he was hanging round the gents bog for anonymous oral sex when he was shanghaied off Clapham Common and robbed by some thugs. The entire fake-'left', from all the Trots to the treacherous little scab Scargill, took their ludicrous 'politically correct' chance to put the boot into the factual materialist analysis of the Marxist EPSR (which had quoted Marx and Engels taking a similar objective line on bourgeois homosexual freemasonries in the 1870s) - the Review's weekly Leninist stance on the world having exposed the hopeless political backwardness of Scargill and his Lalkar and Trot initial supporters. Presumably the entire swamp of Stalinist, revisionist, and Trotskyite fake-'leftism' will now rush to defend Mandelson's homosexual honour from all these nasty bourgeois-press innuendoes.

As usual, the capitalist newspapers go on being more useful with their admissions to the working class than the joke 'socialist' newspapers, full of guru-centric philistinism or self-serving academic opportunism, posturing as a pursuit of revolutionary theory but always deliberately avoiding a committed revolutionary analysis and perspective out of current issues, - the only possible serious political education for the working class, and even more determinedly avoiding any Marxist polemics on any such issues with the Leninist EPSR. Far from bending over backwards to ensure no pejorative mentions of Mandelson's homosexual emotional disorders, some bourgeois media placed a conscious emphasis on the prima-donna factor in this embarrassing farce of deception, bitchiness, and graft in high places:

In a lengthy article in the Sunday Times, Mr Mandelson admits that his initial instinct was to ask the Home Office to keep his name out of the parliamentary written reply about the Hindujas' passport application which led to his downfall.

More damagingly, Mr Mandelson admits that the home secretary, Jack Straw, reminded him of his phone conversation with the home office minister, Mike O'Brien, a week before his resignation. Mr Mandelson's failure to recall this conversation was the "killer fact" which prompted Tony Blair to dispense with his ally.

Far from paving the way for Mr Mandelson's rehabilitation, his account raises questions about his judgment. Mr Mandelson decided to submit his thoughts for publication on Saturday after brooding over the clinical way in which he was removed from office by Mr Blair on Wednesday.

"I decided then and there to start fighting back," Mr Mandelson wrote. "I know I have a mountain to climb before reversing this error, but I know I have to start somewhere:"

Sadly for Mr Mandelson, he is unlikely to reach the summit because his version barely stands up to scrutiny. He damages himself by admitting that his initial instinct, when the Home Office contacted him about the parliamentary question, was to cover up his role.

The question asked what representations had been made on behalf of the Hindujas by Mr Mandelson and by the Europe minister, Keith Vaz. Adopting a Clintonesque approach, Mr Mandelson wrote: "Without any deep or long thought I said to my Northern Ireland private secretary that, as I did not make any representations to get anyone a passport, was it necessary to involve me in the answer?

"That was a mistake. I had done nothing wrong... The instructions I gave ... about responding to this question were not terribly clear, but the upshot was that I was reluctant to agree to a parliamentary answer that could be used mischievously to misinterpret my role.

"I stated that my contact with the Home Office had been casual and fleeting... and I did not see why my involvement needed to feature."

Friends tried to play down Mr Mandelson's attempts to wriggle out of answering a parliamentary question. However, to admit in print he wanted to mislead parliament is a devastating indictment.

Mr Mandelson's account of his conversation with Mr O'Brien is a mess. He wrote that his former civil servants backed up his account that they had made the contacts, but then he admitted: "Of course, nobody could say categorically that such a call [with Mr O'Brien] had not taken place."

He also indicates a remarkably cavalier attitude to Mr Straw, who warned Mr Mandelson a week before his resignation that the Home Office had a record of a conversation with Mr O'Brien.

"I did not think about this or its significance, as my recollection was focused entirely on the involvement of my private office; and, as I had no memory of any such phone conversation, I failed to attach importance to Jack's reference to it," he wrote.

Mr Mandelson's admission that he had been recently reminded of the call removes any excuse he had for failing to mention this. Yet he went on to write that when Mr O'Brien recalled the conversation - in the light of Mr Mandelson's claim that contacts had been made through officials - this "did not jog my memory".

Mr Mandelson has concocted a convoluted explanation for why he failed to mention the call. Writing of his Channel 4 interview, in which he was asked why he had forgotten the original conversation, Mr Mandelson said: "I responded that 'I didn't forget anything.' By this I meant that I didn't deliberately forget to mention it, rather that I didn't actually recall it."

Such an elaborate defence is said to have appalled Downing Street. Beyond Mr Mandelson's attempts to justify his actions, there is a final factor which guarantees his exile. He has claimed his memory may have been hazy because of the burden of the peace process.

In the article, however, Mr Mandelson admitted that he found time to spend the weekend in Versailles making a speech beyond his brief on foreign policy. When the seminar ended he stayed in Paris, dictating his fatal statement from a museum.

 

Campbell's briefing to Sunday lobby journalists on Friday

Q: Did Peter Mandelson mislead the Prime Minister?

A: He [Tony Blair] felt it [Peter Mandelson's answer] was misleading. The problem with this is that there are parts of this that Peter cannot explain even to himself. I think he has been slightly detached from...

Q: The last time you used a phrase like that was after Ron Davies resigned when he was in a terrible state, he couldn't get his mind round what he had done himself. Was it similar to that?

A: Well, I think it was. I don't think it is to do with this necessarily. I would prefer this to be off the record. On the Sunday my conversation with him, he was curiously detached. Peter is normally somebody who would be very focused and attentive to detail, and he wasn't.

Q: Was it anything to do with his personal life?

A: Normally he has got a very sharp mind. I think it was a mixture of things. I don't think he was blaming the press. He has talked about the attention he has attracted to himself. Several years of that has taken its toll. The fact that he consistently finds himself at the centre of stories that are all about feuds and divisions - he felt he was... he didn't have the normal focus and he has been a little bit like that for a while. I get the sense that he kind of had enough.

Q: Will he be standing in Hartlepool?

A: I don't think he has even addressed it. He did not tell the Hartlepool Mail: "I will stand at the next election."

Q: There's this idea that he said to somebody he lacks the stomach for the fight and that that proves what you have been saying about the emotional situation and events.

A: I think there's an element of that. And the Northern Ireland job is not easy, and in the last few months it has been a huge pressure. If you ask me to explain why he has handled it in the way he has done, I think it's him thinking, on the facts, he did nothing wrong at all. But he sees a question going down like that [the written parliamentary question tabled by the Liberal Democrat MP Norman Baker] and he sees media and political alarm bells ringing all over the place, you know, what are they on about now, what's this I'm supposed to have done now and therefore mentally speaking get me out.

Q: Given that Peter has nothing outside politics and has lost everything there, do you worry for his mental health?

A: It's an absolute tragedy that his entire career is in tatters. Lots of people can end up in difficulties. But it's not often that you do it with 24-hour news coverage. That being said, he's a very talented and strong person and I have no doubt that strength and talent will be used somewhere in the future.

Q: Given you said that he's been acting oddly beforehand and has now has been engulfed in catastrophe, are you worried about him?

A: Er, er, I feel shades of the Ron Davies Sunday briefing where I was grotesquely misrepresented. But he's obviously got a lot of friends.

Q: What is his election role?

A: He's not going to be in Millbank. He's a very talented guy, but in the end the Prime Minister is the leader of the Labour Party and will lead the election campaign and there's a lot of other talented people around. It wasn't really one person. Tony Blair is someone who stands by their friends even if they have done something wrong.

Q: Why do you think Peter Mandelson hasn't been focused?

A: He has not been quite as engaged as he normally is. I think it's to do with the extra pressure he's put under because he's Peter. On Sunday he did not appear to have that razor-sharp, focused attention to detail that was his trademark. That is how he came over to me, not in relation to his job, but generally in the past few weeks.

 

It was, indeed, the "constant media intrusion" that brought Mandelson down this week - but it was Mandelson himself and the flaws in his character that invited that constant intrusion. He had also made so many enemies among journalists that there was no sense of forgiveness to mitigate the savagery of his treatment, this week, by the tabloids.

Several instances of his menacing handling of journalists could be culled from yesterday's papers. Alice Miles in The Times described how he snubbed her after she had offended him, even though she had stayed at his house a fortnight earlier.

Andy McSmith in The Daily Telegraph described how, when he was on The Observer, Mandelson had rung his editor to say that McSmith was spreading lies about him, when he was telling the truth. "He was more polite when I spoke to him, pleading with me not to write what I knew to be true because it would cause trouble for Mr Blair among Labour MPs."

According to Trevor Kavanagh, the political editor of The Sun, Mandelson used lying as a legitimate weapon. He denied the truth because he thought that it was fair game. He succeeded in getting legitimate stories vetoed and journalists were often undermined by him.

Mandelson used menacing tactics, according to Kavanagh, from the start of his career in the Labour Party. He would wander into the press room at party conferences, or the press gallery at the Commons, and stand over journalists, particularly from the Press Association and The Mirror, effectively trying to sub their copy and, sometimes, virtually dictating their stories.

He became a one-man monitor of first editions, sometimes fighting to get stories changed even if they were fair and accurate. At first it had been light-hearted and he had enjoyed fencing with journalists who stood up to him, but the use of menace had become part of his armoury. He had got away with the bluff and become enormously powerful.

Peter Mandelson knew the writing of his downfall was on the wall when he read the national newspapers on Wednesday. He was the main subject on every front page, two of which branded him a liar.

"Mandy told a porky" said The Sun, driving its contempt home with another two headlines, "True lies" over the leading article and alongside that, "Minister for Lies". The Daily Mail, second to The Sun as Britain's biggest-selling newspaper, used the same theme: "How Many More Lies Mr Mandelson?".

The Sun front-page comment on Thursday was as brutal as it was brief. In a withering condemnation, it described the shamed Northern Ireland Secretary as a 'lying, manipulative, oily, two-faced, nasty piece of work'. All they needed to really finish the job off was to add the words... 'and they're his good points'.

 

A LOVE triangle involving Peter Mandelson brought a fresh crisis to the Hinduja brothers when their spin-doctors suddenly resigned last night.

The public relations agency Brown Lloyd James, hired last week as troubleshooters for the Hindujas, have now abandoned the family after provoking more bad news than good.

Under the headline "Mandy's gay lover shock", The Sun's front page yesterday announced that there was an embarrassing link between the Hindujas' aides and the Labour politician.

Howell-James, who has been acting as spokesman for the embattled brothers, was previously the boyfriend of Reinaldo da Silva, now the partner of Mr Mandelson.

The Sun wrote a leading article about the ex-Northern Ireland Secretary's boyfriend, who shared his official residence in Hillsborough Castle, under the headline "Murky mess". The Sun asked: "What is the significance of the relationship between Peter Mandelson's lover and Howell James who advises the Hindujas?" The Daily Mail also carried the story, under the headline "Mandy and the Belfast rumba". The Daily Telegraph ran a sly item in its Peterborough column.

The PR agency stuck by the Hindujas yesterday morning, in the hope that this would be a tabloid storm that would quickly blow over.

But when wire agencies began transmitting photographs around the world showing Mr da Silva walking a dog, and the London Evening Standard continued to run the story last night, it became clear that the issue would not go away.

Sir Nicholas Lloyd, chairman of Brown Lloyd James and a former Editor of the Daily Express, issued a statement announcing that they were splitting from the Hindujas. "We were invited to take on the public relations brief for the Hinduja Group on Monday January 15, 2001," he said. "We clearly are unable to represent its best interests when the media are trying to make the agency part of the story. In view of today's press coverage we have decided it will not be appropriate for us to continue to represent the Hinduja group and we have therefore resigned the account."

Mr James was director of corporate affairs at the BBC when he became friendly with Mr Mandelson. He had a relationship with the Brazilian between 1996 and 1998.

But the biggest bias of all, of course, is that Mandelson created this sleazy mess all by himself. The whole of New Labour is up to its neck in the Hinduja scandal, and in lots of other big money graft like it, as indeed, the muddle-headed bourgeois press itself makes clear once all the fine print is added together:

Observer investigation and a series of parliamentary questions about three brothers few had heard of became a government crisis - how a simple two paragraph inquiry opened a stinking can of deceit, lies and obfuscation.

Government officials knew for weeks that questions were going to be asked about ministerial 'inquiries' over passports for rich men. They still claimed they were caught on the hop when the calls came. We can reveal how official incompetence meant that, although the Home Office had agreed on 'lines to take', no one had bothered to tell the press officers who were fielding the calls. And we can reveal how a date of 1998 became 1997 because of an unexplained 'cock-up'.

The Observer can also reveal that Anji Hunter, the Prime Minister's right-hand woman and Mandelson met the brothers at a private lunch in October 1999. Although Downing Street insists Hunter was merely discussing Tony and Cherie Blair's appearance at a party, her involvement with the Hindujas brings the scandal uncomfortably close to home.

There are also new allegations that Mandelson had more than one conversation within Whitehall about the Hindujas' passport applications. For Mandelson's resignation this raises far more intriguing questions than it answers.

If the Government was really caught on the hop last weekend when The Observer first raised its potentially explosive allegations, why did both Mandelson's and Vaz's camp appear to know last Saturday there would soon emerge parliamentary answers linking the Tories to the Hindujas?

If their conversations were as innocent as they insist, why did Mandelson try so hard to hide not only the existence of the one call he admitted to, but the further inquiries senior sources say he made about the passports?

And why did Vaz, when asked by The Observer last weekend, provide a statement that he had only ever inquired about Gopichand Hinduja's passport when the Home Office now confirms he had asked about both brothers?

It is now certain that Labour Ministers knew exactly the extent to which the Hindujas were suspected of corruption even when they were joining the brothers at parties across London. They were warned by senior figures, including Ken Livingstone, before the 1992 election that, like all rich businessmen, their generosity would come at a price.

It is inconceivable that the British intelligence services did not have detailed information about the corruption scandal already enveloping the Hindujas. The Bofors arms scandal, in which the brothers were alleged to have taken £7 million in illegal kickbacks, had already claimed the political career of Indian Prime Minister Rajiv Gandhi. Further parliamentary answers reveal that the Home Office were fully aware of the Hindujas' alleged role in the affair when they granted Srichand British citizenship.

So did officials simply ignore the growing clamour for the arrest of the brothers or was political pressure brought to bear to fasttrack a passport for the billionaire patriarch of the family that 'saved the Dome'? The inquiry by Sir Anthony Hammond will also have to address claims by the Indian authorities, that the Hindujas secured British passports to evade justice in their home country.

In short, this is a story of how passports-for-favours, official mistakes and a cover-up proved to be the bitterest blow to the New Labour project.

A behind-the-scenes briefing battle began. The Government let it be known that the Hindujas were hardly part of Blair's inner circle: yes Ministers (lots of Ministers) might have met them, but that was it.

Sources close to the Hindujas said something rather different. Not only were the Hindujas well connected, they could also count on friendly Ministers and backbenchers to put in a quiet word on their behalf. Peter Mandelson was mentioned. Keith Vaz, the slick Minister for Europe, was mentioned.

Later that month The Observer ran a story linking the Hindujas' Elm donation to the Faith zone at the Dome - which was supposed to be a symbol of New Labour's rise to power - to successful applications for citizenship by two of the Hinduja brothers. There was a picture of Cherie in the kameez. The calls started coming in. One non-political source suggested that Mandelson - a regular visitor to the Hinduja's offices - may have used his influence to get the billionaire a passport.

 

REBUTTAL politics is a classic of the civil service: identify a potential problem and then provide a series of well defined lines to rebut the allegations to the point of boredom. Never volunteer information and be as economical with the facts as possible when asked questions. Then hope the problem goes away.

It is a well practised and well used system. The Hindujas would be a classic example of how it could go wrong.

Just before the Home Office packed up for Christmas, officials met to discuss the issue of the written question. It was recognised that legitimate questions could be asked about ministerial involvement in the brothers' passport applications. A rebuttal operation was put in place.

Mike O'Brien, the quietly spoken Home Office Minister who was responsible for immigration matters in 1998, was contacted after Christmas. The Northern Ireland office was also brought into the loop and Mandelson was given the opportunity to make amendments. Vaz was offered the same courtesy.

Although they could not have known the significance of the Mandelson call at the time, officials checked the timing and, the exact nature of the approach. The file on the Hindujas was pulled out and a note was discovered detailing the call itself. A separate note from O'Brien's private secretary dated 2 July confirmed that the information passed on to Mandelson about SP Hinduja's application was correct.

As is normal procedure, Vaz and Mandelson were contacted to tell them that a parliamentary question referring to them was about to be answered. Their input was invited. Vaz's office approved the draft quickly and it was only stalling from Mandelson that held up the release of the answer. Such was Mandelson's concern over the contents of the 100-word response it was redrafted by officials six times. Mandelson appeared to know that something significant could be about to happen.

On 18 January, in the vote office of the House of Commons, the answer arrived, exactly a month after the original question. A day later Mandelson would be asked about it. He would lie. Four days after that he would resign and be cast into the political wilderness. Or so it was thought. Mandelson has now started the fight back.

AS THE PIECE of paper bearing the seven lines that would sink Mandelson fluttered into the wooden in-tray in the House of Commons 10 days ago, a distinctly A-list group of European politicians and financiers were descending on Versailles for a discreet meeting of minds.

The guest list at the hotel nestled deep in the grounds of the Trianon, the opulent palace built by Louis XIV as a retreat from his nearby court at Versailles, ranged from Chancellor. Gordon Brown - who arrived late on Friday from Brussels - and Jean-Claude Trichet, governor of the Bank of France, to John Major's former adviser Andrew Tyrie and the ebullient former Dome chief, P.Y. Gerbeau.

And, there, at the heart of such an influential group, was Mandelson - the man supposedly so absorbed in the Northern Ireland peace process that he would soon be too busy to remember details of his involvement in the passport-for-favours row.

His heart hardly seemed to be in Belfast either. Mandelson's speech that Friday was on foreign policy and the only other thing on his mind was the Dome.

He was spotted in the hotel bar with Gerbeau, getting an animated briefing on the Frenchman's bid to buy the building - a joint scheme with Mandelson's good friend, the nightclub boss James Palumbo.

 

The Home Secretary told Mr Blair last Tuesday night that he had personally reminded Mr Mandelson only days earlier of his telephone conversation with Mike O'Brien, the Immigration Minister at the time. Mr Straw told the Mr Blair that there were serious "problems" with Mr Mandelson's repeated statements that he had no "recollection" of the call in June 1998.

It has emerged that a powerful triumvirate - Sir Richard Wilson, the Cabinet Secretary, Jonathan Powell, the Prime Minister's chief of staff, and Lord Irvine of Lairg, the Lord Chancellor - prepared reports for Mr Blair last Tuesday night and Wednesday morning about the affair.

Cabinet minister Stephen Byers has met them at his place and their place, in offices and at receptions, in London and in Cambridge. His deputy, Patricia Hewitt, has enjoyed a snack at their Bombay home and lunch at their London home.

The extensive contacts between the billionaire Hinduja brothers and ministers were detailed last night by a meeting-by-meeting account released by the Department of Trade and Industry. A former adviser to the billionaire brothers explained the brothers' attitude to politicians, revealing that the Hindujas see them "as a commodity to trade with".

Mr Byers, the trade secretary, authorised publication of the list as officials, mindful of how Peter Mandelson's evasiveness cost him his career, insisted that the department wanted to be open.

The two brothers at the centre of the passport row, who are now being questioned by Indian police investigating an arms deal, arranged 13 meetings in less than two years with three named ministers and also saw them at countless other events.

Mr Byers even paid a visit to the Cambridge academic institute founded in memory of SP's only son, Dharam, who in 1999 set fire to himself and his Anglo-Indian Catholic wife.

Any of the ministers could face serious problems if the list proves inaccurate - and other departments will face pressure to compile their own versions as the spotlight turns on the networking of Britain's richest Asian family.

Contacts continued even after October 2000 when it became known that the Indian police wanted to question them over kickbacks in the Bofors scandal.

The revelation about Ms Short's contact takes the number of cabinet members, including Peter Mandelson, known to have met the Hinduja brothers to six, almost a third of the cabinet. Blair, Derry Irvine, Stephen Byers and Robin Cook are the others.

 

A former adviser to the Hindujas in Britain explained their thinking in courting politicians.

"They see no difference between Britain and India. Politicians are no different, they are commodities that you trade with," he said.

The ex-aide, who also knows Mr Vaz, added: "Keith is well meaning and sometimes abused by people around him. Keith will always try to help anyone - he is a good natured sort and that is misinterpreted as venal."

Friends of Vaz, who is already fighting to avoid becoming the second ministerial victim of the granting of passports to the Hindujas, last night denied that he was involved in pressing the Bank of England to grant the billionaire Indian brothers a banking licence.

A former Conservative minister claimed that Vaz's interest in the brothers' banking ambitions followed a decision by the Bank to reject an application from Srichand and Gopichand Hinduja in the late 1980s for a licence to offers banking services to the Asian community.

At the time the brothers were facing media allegations that they had acted as middlemen in an arms deal.

The former minister said an official told him: "The Bank sought advice from the Foreign Office. The advice was that they were not to be touched."

Hinduja said yesterday that although he had spoken to Mandelson and "others" about his passport application, he had "never asked for any favours". This weekend fresh evidence emerged of how the brothers provided secret payments, hospitality and gifts to ministers and MPs. This included payments to about 12 MPs of up to £1,000 each for their 1997 general election expenses. The money went to the constituency party campaigns of six Labour and six Conservative MPs. Sir Edward Heath, the former Tory leader, has admitted that his constituency association received £2,000-£3,000 in the early 1990s.

A £5,000 champagne party where Lord Irvine, the lord chancellor, and Vaz, the Europe minister, were principal guests. Four boxes of gifts delivered to Mandelson at the Cabinet Office in 1997. A former chauffeur of Gopichand Hinduja said he personally delivered the gifts, thought to be exotic fruit, when Mandelson was the minister responsible for the dome.

The brothers also attended a £500-a-head Labour fundraising party at the London Park Lane Hilton in April 1998 where they took the opportunity to be photographed with Tony and Cherie Blair.

Downing Street last night denied a report that Anji Hunter, Blair's personal secretary, had received a pashmina shawl worth up to £400 after lunch with the brothers. Labour said the Hindujas had never made any donation to the party nor paid it any sponsorship money.

A spokesman denied reports that the brothers had offered the party a £2m gift in 1998. Lord Levy, Labour's main fundraiser, also denied that the brothers had paid any money into Blair's private trust before the last election.

But John Redwood, Tory MP for Wokingham, said: "We will especially look at whether any ministers have broken the rules of conduct. We shall also look at whether Vaz should have registered the Hindujas' private party." This weekend Vaz denied that he had acted improperly in lobbying Blair and other ministers to help the brothers get passports.

Vaz is already the subject of a parliamentary investigation into allegations that he received payments from businessmen in his Leicester East constituency.

A report on the claims is now before the standards and privileges committee, which is expected to clear Vaz of any serious charges of misconduct. But he may be found to have committed at least one minor breach of the MPs' code.

The Sunday Times can also reveal that the Hindujas are currently asking Stephen Byers, the trade and industry secretary, to approve a loan guarantee for their private £1 billion project to build a power plant in India.

In a separate development, a former senior immigration official claimed Mandelson had written to the Home Office about an application by his Brazilian boyfriend to extend his stay in Britain. The former official said Reinaldo da Silva, 28, had obtained such an extension. He said: "Peter Mandelson wrote saying that he would sponsor his fees, accommodation and maintenance."

So now this cauldron of festering corruption is to be allowed gently to go off the boil via the usual 'democracy' routine of setting up an 'official inquiry' under an approved, and usually retired, lawyer of some kind or other, invariably a respected and respectful pillar of the establishment. Even the 'democracy'-loving Guardian felt that on this occasion, this normal stunt might meet with widespread cynicism, and felt obliged to comment:

The lawyer leading the inquiry into the Hinduja passport crisis advised Tory ministers to sign "gagging orders" to keep secret crucial information in the arms-to-Iraq scandal.

Sir Anthony Hammond QC drew up public interest immunity certificates to suppress evidence of government collusion in the sale of weapons-making machinery to Baghdad in breach of a UN embargo.

Sir Anthony, unveiled by No 10 as the man to get to the bottom of an affair that has cost Tony Blair one of his closest colleagues and threatens a second minister, is a great defender of official secrecy.

The Tory home secretaries Kenneth Baker (now Lord Baker of Dorking) and Kenneth Clarke signed documents prepared by Sir Anthony to withhold information that was to prove crucial to the defence of three executives in the Matrix Churchill case.

The Scott report into the arms-to-Iraq scandal recorded Sir Anthony's involvement and Lord Baker's admission that he was not told that one of three executives, Paul Henderson, was an MI6 informer when he approved a ban on suppressing the involvement of the security services.

A certificate prepared by Sir Anthony said: "The very nature of the work of the security and intelligence services of the crown requires secrecy if it is to be effective."

No. 10 presented Sir Anthony to the public as a former Treasury solicitor but he spent only three years in that post, retiring last year. The government has in effect picked an old Home Office hand to investigate the Home Office: Sir Anthony spent 24 years in the department up to 1992. Five years at Trade and Industry before becoming Treasury solicitor completes his CV.

Knighted last May, Sir Anthony, 60, was also involved in the earlier legal battle to gag former MI6 officer Richard Tomlinson.

Now investigating the granting of a British passport to GP Hinduja as well as SP Hinduja, Sir Anthony was appointed to review whether the applications were "properly dealt with in all respects".

"Parliament unfortunately misled on a trivial technicality" is one likely verdict if an establishment feeling prevails that recriminations over bourgeois government failure have seen enough punishing bloodletting for the moment; but some more poisonous scapegoating might just be heading Mandelson's way.

But unlikely to feature in the report is any explanation about the queerest thing of all, - how such a seemingly trivial issue as a mis-remembered phone call 'of no significance' could have escalated into such a huge political scandal for capitalist government's routine behaviour, (the Tories being obviously just as venal, if marginally less tarty and greedy because of better breeding and more familiarity with dubiously-achieved glitz and influence.)

It can only be because a deeply-flawed and dodgy system is just waiting for disaster to strike, - at any minute, almost out of any mishap. The stench of Mandygate is yet more reason to build Marxist-Leninist science as rapidly as possible. EPSR

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