Blair letter to Indian steel magnate was approved by two departments

Internal links

Voters to punish Labour over Mittal link

Two Government departments were involved in approving the letter signed by Tony Blair in support of a Romanian business deal by the steel magnate Lakshmi Mittal, it emerged yesterday.

Officials at a trade body jointly run by the Department of Trade and Industry and the Foreign Office were sent a draft of the letter before it was seen by the Prime Minister.

They were asked whether they believed the Government should offer its support for a £300m deal by Mr Mittal, an Indian millionaire, to buy the Romanian steel firm Sidex, and whether the wording of the letter of support was appropriate.

Last night, Trade Partners UK – the Government agency that helps British firms to gain contracts abroad – refused to comment on the advice it gave.

But the Conservatives will today ask questions about the exact nature of the advice given by the DTI and whether it informed Downing Street that Mr Mittal's company, LNM, was not a British company with less than 100 UK employees

It also emerged that Foreign Office officials inserted the reference to Mr Mittal being a "friend" of Mr Blair in the letter which was later removed by Downing Street officials before the Prime Minister signed it.

There was speculation at Westminster yesterday that Downing Street officials may have deliberately removed the reference to Mr Mittal to avoid any link between the Labour Party donation and the Prime Minister's endorsement of his business deal.

But government sources yesterday implied that Mr Blair had known that Mr Mittal was a party donor but did not make the connection with LNM, his company, when he signed the deal.

The Tories yesterday piled on the pressure over the Mittal affair and accused Downing Street of lying. They said Downing Street had told five untruths, including the assertion earlier this week that the Prime Minister did not know of the £125,000 donation made by Mr Mittal even though he attended a party with him just weeks before the letter was written.

"This saga grows more worrying by the day," said Tim Collins, the shadow Cabinet Office Minister. "Downing Street briefings are rapidly losing any credibility."

The Labour Party said it had no record of Mr Mittal "attending any fundraising event organised by Labour's fundraising unit". But a spokesman said: "I cannot categorically say he has not attended any parties organised by individuals."

Mr Blair will come under fresh pressure today over the cost to the taxpayer of a visit by the Romanian Prime Minister to Britain last November, at which there was a ceremony to mark the signing of the deal.

Downing Street confirmed that the cost of accommodation, official entertainment and travel for the delegation during the three-day visit was almost £27,000.

The role of Jonathan Powell, the Prime Minister's Chief of Staff, was again called into question after David Clark, a former special advisor to Robin Cook when he was Foreign Secretary, said that Mr Powell would have known of Mr Mittal's donations from Labour's days in opposition.

"I would certainly expect that Jonathan Powell, as the person who was at the centre of the relationship between what was then the Leader of the Opposition's office and Labour's high-value donors, would have known of a donation of the size of £16,000 that Mr Mittal apparently gave just before the 1997 election," he told Radio 4's The World at One. "I think something has clearly gone wrong if the Prime Minister is putting his name to a letter on behalf of the company and is unaware that the individual who runs that company is somebody who is also a very significant donor."

The former defence minister, Peter Kilfoyle, also questioned Downing Street's handling the affair and implied that the full truth had not been told.

"I do expect that somebody should take responsibility and make sure there was nothing questionable – there was nothing doubtful whatsoever – about this kind of a letter on behalf of a company that had made a political donation," he said.

There was fresh speculation yesterday that Mr Blair's letter may have been influential in clinching the deal for the Indian steel magnate.

Mr Mittal's British-based company Ispat International has seen its investment status steadily slide since 1998.It is registered in Rotterdam and is floated on stock exchanges in Amsterdam and New York.

It was Mr Mittal's private sister company, LNM Holdings, which bought the Romanian steel plant. It is registered in the Dutch Antilles, a Caribbean tax haven.