NO PERSON has a good enough memory to make them a successful liar. This piece of wisdom from one of America's greatest politicians, Abraham Lincoln, seems to be being tested to destruction as Labour's fundraising methods are exposed.

Alexander's explanation suggests that when she wrote to Green thanking him for his donation she believed it to be a corporate one. Yet her election team's list of donors flagged up in November a concern that Green's donation may not have been permissable, in other words that it was not a corporate donation but a personal one. It was clear to her then that his offer was suspect. Last week, when Alexander offered an apology, she claimed she only recently became aware of the legal difficulty in accepting the donation. It seems clear now that she was aware there was a question mark over the Green money but nevertheless went on to accept it, a sign of a distinct lack of political judgement that affects the reputation of her party. On this and this alone her position is untenable, and she should resign as quickly as possible to limit the damage to her party.

However, Alexander's departure would prove a disaster for Labour in Scotland. She has made all the right noises on the urgent need to update the mechanisms and structures of devolution; she has understood that the constitutional status quo is unacceptable in a changing and politically maturing Scotland. Labour will find the search for her replacement no easy task - the price of Alexander's misjudgement will be a high one.

Similarly, at Labour's national headquarters in London and among Labour MPs at Westminster, there is a growing fear that a lack of rigour and lax policing on who gives money to the party is the root cause of yet another funding disaster. Coming so soon on the back of the damage caused by the cash-for-honours inquiry, Labour look like a political party far more interested in laying down the law than actually bothering to follow it themselves.

Political parties always make mistakes - politics is a lengthy game of imperfection. But there is an expectation that mistakes should be acknowledged and something positive taken from them. Labour at this moment look incapable of understanding this basic learning process.

It is ironic that New Labour came to power in 1997 pointing to the need to end sleaze and restore faith and trust in political parties. They wanted an end to offshore anonymity; an end to the hidden donations edging Britain closer to oligarchy; an end to paid-for influence at the centre of UK politics. The alarming result after a decade and more in power is that adequate laws are there, but they appear to be routinely ignored by the party who forced them on to the statute books in the first place.

Although the formal Blair era has ended, its negative legacy appears still capable of coming back to haunt Gordon Brown, who looks caught out by misfortune after misfortune.

He pledged yesterday to look again at new rules on party funding, and to effectively put at risk Labour's funding links with the trade unions. This might at first glance appear praiseworthy. But if the strategy is to simply buy him some calm before the full details of Scotland Yard's latest investigation into Labour's financial dealings are known, then the strategy will backfire.

Open, honest and trustworthy government might be high moral priorities for Brown. But in hard reality his party appears to be infected with dodgy practices that it cannot shake off.

So is this the point where the state's power should intervene, where state funding of political parties should emerge as the rescue mechanism to clean up our politics, and limit the power of rich individual donors?

This is politically naive. It points to the rule of law being inadequate, to political parties knowing what is required, but being unable to police what they know should be enforced.

The reality is that corruption is the potential enemy of any democracy, and one that won't go away just because the state has limited the attractiveness and purchasing power of any wealthy outsider who wants inside influence.

This does not mean there is no need for some form of state control of party political funding. The Electoral Commission should look at what is happening on the other side of the Atlantic to understand the dangers when there is no control, no ceiling, on election spending. Next year, it is estimated that America's main parties will double the spending total of the last presidential race, between George W Bush and John Kerry. The total last time was $500 million - so next year's presidential bill will be $1 billion. Where will the main candidates find that kind of money? The reality is that they will not need to look far, it will come to them.

The US model is far from perfect. But a model based simply on a cover-all remedy of state funding is equally flawed. Ultimately, the law is not there to protect the politician, it is there to protect the public from the combination of the corruptible politician and any individual or corporation seeking to buy power.

If our electoral laws are flimsy and ignored, this is the perfect time for them to be tightened and enforced. We should expect nothing less.