CABINET minister Peter Mandelson is involved in a secret financial arrangement with his beleaguered government colleague Geoffrey Robinson concerning a loan of ú373,000 to buy his London home, a Guardian investigation can reveal.
The extraordinary deal was not disclosed to Tony Blair for more than two years, despite the crucial political relationship and close personal friendship between Mr Mandelson and the Prime Minister. Key Whitehall officials were also kept in the dark until a few days ago.
The cash, which enabled Mr Mandelson to buy his ú475,000 home in fashionable Notting Hill, west London, raises a question over whether the Trade Secretary breached the rules of ministerial conduct. Although the deal was done in 1996, Mr Mandelson did not tell Mr Blair or the permanent secretary at the Department of Trade and Industry, Michael Scholar, until last Thursday.
Mr Mandelson and Mr Robinson issued statements to the Guardian last night confirming the loan. Its disclosure will intensify pressure on Mr Robinson, the Paymaster General, who has been at the centre of a string of revelations about his tax and business affairs.
Mr Mandelson insisted that there was nothing wrong with the loan. He said: ╥At all times I have protected the integrity and professionalism of the DTI. Geoffrey Robinson asked for confidentiality and I respected that. I do not believe that accepting a loan was wrong. There is no conflict of interest in this. The loan was always intended to be short-term and I am repaying the remainder of the loan in full with the help of my mother.╙
Disclosure of the loan clears up a long-running mystery over how Mr Mandelson, as a backbench MP earning just over ú40,000 a year, was able to afford the ú475,000 four-storey house in a street filled with media and other celebrities.
Mr Robinson said: ╥Peter Mandelson, a friend of long standing, asked me for help in 1996. I was in a position to help through a loan and did so with the understanding that it would be repaid in full in due course. That is all there was and there is to it.╙
Mr Mandelson paid back ú40,624 in spring 1997, and is paying back the rest. The loan was given at Midland Bank base rate, substantially lower than the market mortgage rate. He would not have been able to borrow the sum from an ordinary lender and has so far saved at least ú10,000 in interest payments.
Mr Mandelson has left himself vulnerable by failing to tell the Prime Minister or the permanent secretary of the loan until last week. He faces accusations of at least two possible areas of conflict of interest. The first involves allegations in September that Mr Robinson╒s businesses breached company law, a matter that would result in investigation by the DTI and mean one minister sitting in judgment on another. However, Mr Mandelson attempted to put himself in the clear by telling the permanent secretary at the time that he would rule himself out of any investigation.
Nevertheless he did not disclose the loan to the permanent secretary because, he told the Guardian last night, ╥I was satisfied that any conflict of interest had been properly dealt with.╙
Downing Street backed Mr Mandelson╒s version of events. ╥The Prime Minister is confident that Peter Mandelson has been properly insulated from any decision relating to Geoffrey Robinson,╙ said Number 10.
The second area of potential conflict involves a DTI independent inspectors╒ report into the Maxwell empire, to which Mr Robinson was linked. Mr Mandelson will have to decide whether to publish the report, which is not yet completed.
Despite his assurances, Mr Mandelson told BBC2╒s Newsnight that in retrospect he wished he had reported the matter earlier. ╥With the benefit of hindsight it would have been better if all the facts of this matter had been got out,╙ he said.
The disclosure is an embarrassment for Mr Robinson, Mr Mandelson and Mr Blair, who took two holidays in Mr Robinson╒s Tuscan villa, and the Chancellor, Gordon Brown, who stayed at his home in Cannes. Mr Robinson has been generous in support of his colleagues since just before the general election, and bailed out the Labour modernisers╒ magazine, the New Statesman.
Mr Mandelson and Mr Brown have been engaged in a feud since 1994, one that now threatens to engulf not only Mr Robinson and Mr Mandelson but the Chancellor╒s press aide, Charlie Whelan, who has been blamed for anti-Mandelson leaks.
Mr Whelan helped Mirror journalist Paul Routledge with a biography of Mr Brown published in January and there have been suspicions around Westminster that he has again helped him with a hostile biography of Mr Mandelson to be published early next year.
Mr Mandelson╒s camp believe Routledge has, independently of the Guardian, discovered details of the loan.
Last night Mr Whelan denied being behind the latest disclosures. He said: ╥I haven╒t a fucking clue what is in Paul Routledge╒s book.╙
