Shadow Justice Secretary Nick Herbert has accused the government of breaking the trust of the public just months after Gordon Brown took over as Prime Minister.
He added that the Conservative party is confident that they have not received any donations through a third party.
Yesterday the Electoral Commission announced that it has referred the illegal “anonymous” donations to Labour from property developer David Abrahams to the police.
Mr Abrahams also donated more than £650,000 to the Labour party through third parties, a clear breach of the law.
The Political Parties, Elections and Referendum Act 2000 requires details of a donor acting through a proxy or third party to be recorded by the political party and his or her details reported to the Electoral Commission.
Mr Herbert, who is one of two openly gay men in the Conservative Shadow Cabinet, spoke to PinkNews.co.uk this morning about the donations.
“It appears that Labour has systematically attempted to undo or evade its own party funding laws. This will dismay the public.”
On Monday the party’s general secretary Peter Watt resigned after admitting he had known about the third party donations and Gordon Brown admitted the donations were illegal.
“What is doubly serious is not only that the law has been broken, as the Prime Minsister said, but there has been a systematic attempt to evade the law by the party that was parading its high moral credentials in introducing this legislation, beating up all the other parties at the time for their approach to this matter, and yet has sought to evade its own legislation not once but twice,” said Mr Herbert.
Labour’s chief fundraiser, Jon Mendelsohn, who was appointed by the Prime Minister in June, learned about Mr Abrahams’ proxy donations last month, but was unaware, as was Mr Watt, that is was illegal.
As a close aide of the Prime Minister, Mr Mendelson brought the scandal closer to Downing St.
“It is completely incredible that those people who are officials involved in this fundraising effort do not understand the law,” commented Mr Herbert.
“These are now matters for criminal investigation but in my view these are very serious indeed.”
On Radio 4 this morning the Justice Secretary Jack Straw defended the government.
“Gordon Brown had absolutely no knowledge of any connection, inappropriate connection, between Mr Abrahams and Mrs Kidd. Neither did I,” he said.
£185,000 that Ms Kidd had donated to the Labour party since 2003 all came from Mr Abrahams.
“If Gordon Brown had had even a sniff that this was going on, he would have stopped it immediately, as would have I.”
Mr Herbert, whose Justice brief includes reform of party funding, suggested a limit on donations.
“We have called for a cap on all donations from whatever source, of £50,000, and unfortunately that is not possible. Labour is refusing to agree to that because they will not cap union donations.
“They should rethink that policy urgently. It is clear that we need to build public confidence in the way in which parties are funded.”
“The union bosses have control over these funds and we just think there should be one rule that applies to everyone.”
Mr Herbert said he was confident about donations to the Conservative party.
“We are absolutely sure our own house is in order, that has been made clear.
“We know who all our major donors are. We go through all the proper compliance procedures, but we have said let’s have a cap on donations so that no party has to be reliant on major donations.”
He also rejected the option of taxpayer-funded parties.
“I don’t think that its a solution to say that the taxpayer should step in.
“We are much more interested in reducting the cost of politics and that is what David Cameron has made clear.”
The Tory leader’s trip to Washington, which included a meeting yesterday with US President George Bush, has barely been reported in the UK because of the media interest in the illegal donations.