Britain's Crown Prosecution Service has decided not to bring proceedings against anyone over the so-called cash-for-honours affair.
After a long and expensive investigation, during which former Prime Minister Tony Blair was questioned as a witness, nobody will face charges.
British Prime Minister Gordon Brown said the UK needed a better system for political funding.
A police inquiry was launched in March 2006 after allegations from a Scottish National Party MP that four wealthy individuals had been nominated for peerages after lending the Labour party large sums of money.
Scotland Yard and the CPS spent 16 months investigating allegations that the Blair government offered honours to Labour party donors.
A dozen wealthy backers financed Labour's 2005 election campaign with loans worth some £14m.
The investigation was later widened to include the Conservative party but press attention focused on an alleged cover up inside Downing Street as details of the inquiry leaked out.
