Morning:
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A devious Labour Friend in the North has done more damage to the party he supports than all the black arts of Tory Central Office could ever have mustered.
It was "unlawful and inexcusable in any way", the Prime Minister 'fessed up yesterday. The last emphasis was easily decoded. Unlike my predecessor he might as well have added: "I'm not going to come up with extenuations, excuses and lawyerly bits which turn out to mean something else. I tell it how it is."
Alas, how it is looks damning from any angle. Mr Brown seemed so furious that he sounded remarkably straightforward. How had he reacted to receiving the news of the scandal about to be published? "A very unhappy evening was had by all," says one member of the inner circle with a shudder.
Giving the money back is about as reassuring as announcing that if caught shoplifting, we will, of course, hand over the stolen goods. It is the logic of the ethically deluded.
A Government that first promises to clean up party funding then embroils itself in illicit loans which lead to a police inquiry has had its warning. Every aspect of this fresh scandal is a sign of rot - of personal and political judgment, of calibre of staff, general intelligence and even the last quality to disappear - self-preservation.
Mr Brown's fate is now commonly compared with the erosion of the Major years. In one regard it is potentially worse. Mr Major was widely deemed to be a nice enough man by the public (he wasn't half so nice, really). But he did not style himself as the eradicator of sleaze or the harbinger of a new spinfree era. When the PM has to call on retired bishops and judges to help reset what he might call the "moral compass" of his party, things really are desperate.
Harriet Harman's position is unsustainable. She should go for the same reason she cited when she ran with such determination for the deputy leadership and became party chairman. She was frank then about the need for a more open channel between the leadership and the party than had existed under Mr Blair. She knows the party needed to rebuild its structures and morale and fashioned her bid for the job accordingly.
This role can hardly be fulfilled with any credibility after her own decision to accept money - oddly registered at the end of her deputy leadership campaign from a donor she did not know. If another judicious senior figure, Baroness Jay, deemed it suspicious enough to advise her preferred candidate, Hilary Benn, to turn it down, we might fairly ask why Ms Harman was inclined to accept it. One unforced error Mr Brown made yesterday was in placing her anywhere near an investigation into this business, in which she has most to gain or lose.
Ms Harman has many strengths: she is personable, experienced and would certainly be a loss to Mr Brown as a strong female media performer in a sea of microphone mediocrities. Nonetheless, it is far better for her to go now and be resurrected later than to linger. In a world where Jonathan Aitken is rehabilitated as a moral authority, anything is possible. Mr Benn, who appeals to what one party insider calls "the bien pensant, teetotal Methodist tendency in the ranks", surely has a strong claim to succeed her.
It was of course Jack Dromey, aka Mr Harman, who as party treasurer denounced Lord Levy's secret loans in a dramatic battle to "defend the integrity of the Labour Party" - an intervention coinciding with a sustained Brownite attack on Mr Blair's waning leadership last year. I suppose it is too much to ask him to rise up and defend it again now, but the thought is tempting.
A deeper malaise afflicts a party that keeps in post a general secretary dim enough to think it prudent to ignore the Electoral Commission's warning about the use of third parties to conceal loans or donations. At the very least, why was there no systemic check in place to ensure that if an alarm was sounded about a source of donations, other potential recipients were alerted? As the Tories could confirm from the Aitken/Hamilton years, the real sign of trouble is the failure of its alarm bells to sound when things are awry.
Mr Brown is now on his fourth "worst week" on the trot. In his case, trouble comes not as single spies but as a whole army: the botched election, figures awry on the number of foreign nationals working in the UK, more Northern Rock fallout, the fiasco over benefit records - all leading up to a humdinger of a funding scandal.
Some of this is bad judgment. Some of it is bad luck. Whatever it is, it hampers the PM's attempt to govern or to project anything that voters will associate with his Government beyond the fading memory of a good start, followed by a series of disasters.
The main internal criticism I hear is of a lack of any readily definable idea of what the Government is about. "Half think-tank, half fire-station" is the description of one former inmate of the present modus operandi of No 10.
Mr Brown thus moves ponderously between macro-announcements on carbon emissions and education as the "great liberator of mankind" to emergency mode. Meanwhile, a turbocharged Mr Cameron dashes hither and thither issuing simple (at times simplistic) but carefully targeted promises, while Mr Brown seems to have lost the invisible thread that briefly connected him to Middle England.
Labour's frustration is that they can see so many areas where the Tory leader's own platform is flaky but that there is relatively little scrutiny of his weaknesses - inevitable while the Government is in such a self-harming phase.
This is not just any funding row. Its details look murkier by the hour and could end up in criminal charges. The scale of deception is too big to lay off as a one-off embarrassment caused by an oddball donor. It will force Labour back into negotiations on party finance from a weakened position and embolden the advocates of state funding, which promises more than it ever delivers in terms of stopping abuses and often transfers them to a far larger scale.
Worse still, it will deter exactly the sort of people we should be trying to encourage to finance parties: large numbers of small donors who are open and proud about what they give.
Instead, many potential givers will look on this immorality tale and conclude that they would have to be mad to get involved. Who can blame them?
