Leading article: Money, integrity and the law of the land

Parliament reconvenes today after the two-week Easter recess. But it is almost as though MPs have not been out of Westminster at all, so feverishly has politics seethed away in their absence. Far from dying down during the break - as many a government minister must have hoped - the allegations about loans for peerages have only become more insistent. Scarcely a day has passed without new individuals being implicated. The scandal is now starting to lap dangerously close to the Prime Minister.

However serious things looked two weeks ago, they look considerably more serious now. The arrest of Des Smith, head teacher and former government adviser, as part of the Metropolitan Police investigation marked a watershed. Until then it had been possible to believe that the whole affair would be contained within the political domain, as has happened with misconduct claims in the past. In the end, there might be harsh words and formal censure; a career or two might be damaged. But no one would actually be branded a criminal.

Mr Smith is now on bail, but his arrest sent a message. The issue of loans for peerages is not just a matter of politics, it is also a matter of the law. Awarding honours in return for money is a criminal offence. It is corruption of the sort we tend in this country rather condescendingly to associate with countries closer to the Mediterranean. Mr Smith's arrest, like the search of the Cabinet Office, was a signal that the Scotland Yard inquiry is for real. Several of the Prime Minister's colleagues now expect to be questioned, if not the Prime Minister himself.

The priority now is for the police investigation to proceed as expeditiously as possible. Two other inquiries - by the Electoral Commission and a parliamentary committee - are waiting on the result, which means the affair will cast its shadow over political life at least until the police inquiry is complete. In the meantime it would be wise for the Prime Minister to forego any new exercise of political patronage until the loans for peerages allegations have been cleared up.

As so often with political scandals, much damage has already been done - not least by the very familiarity of the allegations. The use of patronage and the courtship of the very wealthy is something that has dogged the Blair government from the Bernie Ecclestone affair on. That the latest charges are plausible, of course, does not mean that they are necessarily true or would withstand challenge in court. It does mean, however, that they more easily gain traction with voters. And whatever the findings of the police and other inquiries, some of the negative consequences are already clear.

First, as has been apparent from the teachers' conferences this weekend, among the casualties is likely to be one the Prime Minister's favourite projects: the attraction of private money into the school system and the founding of more city academies. Indeed, donors for any government project are likely to be few and far between. Bona fide donors could well shy away from endowing city academies for fear their generosity will be misinterpreted; those who might have sought honours will understand that this is not a reliable route.

Second, by encouraging donors to make loans rather than gifts before the last election, both major parties slid out of new rules designed to foster accountability. If the far-right British National Party makes a strong showing in the council elections, voters' objection to "sleaze" in the political mainstream will be one of the reasons. By circumventing its own rules, this Government has increased public cynicism not only about its own integrity, but about politics in general. This is a sorry enough result, even before the law has had its say.