Labour figures 'in the frame' over peerages-for-loans scandal

MPs in charge of investigating the cash for peerages scandal will postpone all further interviews with suspect party members until July, after police said such inquiries could prejudice a criminal investigation.

Tony Wright, the Labour MP who chairs the Commons Public Administration Committee, said senior Labour Party figures were "in the frame" as a result of the inquiry by the Metropolitan Police into breaches of electoral law by the peerages-for-loans scandal.

The decision to delay interviews was announced after the committee met the Metropolitan police chief leading the inquiry, Deputy Assistant Commissioner John Yates, and members of the Crown Prosecution Service. Mr Wright said: "It is pretty clear some of the witnesses we have identified are very much in the frame as far as the police are concerned. The police have advised us that taking evidence now from such people - and we took independent legal advice on this too - might conceivably cause some legal difficulty later down the track." He added: "The idea that this is not a serious inquiry is not true. This is a serious inquiry."

The police investigation centres on whether senior Labour figures breached the 2000 Political Parties, Elections and Referendums Act, by concealing from the Electoral Commission - the party funding watchdog - the existence of "soft" loans to the party. It is a criminal offence to make false declarations to the commission.

Mr Yates said he would be ready to report to the MPs on progress in September, which threatens to overshadow Labour's conference in Manchester at the end of the month. Mr Wright said police were not being given a "blank cheque" to delay indefinitely and should report back before the MPs rise for the summer recess in July. Lord Levy, the Prime Minister's high-value fundraiser for the Labour Party, was to have been among the witnesses called to give evidence to his committee.

Police are believed to have interviewed some of the Labour lenders who were nominated for peerages but were blocked by the Lords Appointments Commission, which vets nominations by Mr Blair and the other party leaders for peerages .

They include Barry Townsley, a stockbroker; Robert Edmiston, a car importer; Chai Patel, head of the Priory clinics, and the property magnate Sir David Garrard. None was interviewed under caution.

It is believed some of the lenders were rejected for peerages because their personal fortunes are offshore - to avoid paying UK taxes - and the commission only later discovered they had given loans to the Labour Party, which tried to defuse the row over its funding by disclosing that it had taken £13.9m in loans from 12 businessmen to help finance its 2005 election campaign.

Legal action could depend on whether the loans were on a commercial basis. Commercial loans do not have to be notified to the Electoral Commission, but non-commercial loans could be seen as donations or gifts, which should have been declared.

Lord Stevenson of Coddenham, chairman of the Lords Appoints Commission, told the committee the commission may have been kept in the dark by the parties about soft loans by some nominated for peerages.

Many assumed that the inquirywould merely embarrass Mr Blair, but last night there were signs it could lead to charges.