Blair faces police questions next month

Tony Blair could be interviewed as early as next month by the police in the "cash for peerages" corruption inquiry, authoritative sources have revealed.

The current Scotland Yard investigation is considered to be "in the balance" as far as uncovering proof of criminal action, The Independent has been told.

A senior legal source said: "The question of any charges is currently in the balance - it could go either way."

The Prime Minister will be interviewed in either August or September, before the Labour Party annual conference. He will be questioned about what he knew of the allegations that millionaires were nominated for peerages in return for making massive loans to the party in the approach to the general election last year.

News that Mr Blair will be interviewed in the next nine weeks will cast a shadow over the Labour conference which starts on 28 September in Manchester and is already being dominated by talk of whether he will use it to disclose when he is standing down.

The detectives interviewing the Prime Minister are expected to include Assistant Deputy Commissioner John Yates, who is leading the investigation.

The last prime minister to be interviewed in a corruption inquiry was David Lord George in the 1920s.

Detectives from the Metropolitan Police's Specialist Crimes Directorate have questioned 48 people so far, 13 of them under caution. Three individuals - understood to be Labour lenders - refused police requests to be questioned about Labour's secret loans that totalled £13.9m. Two files have been submitted to the Crown Prosecution Service so far.

The police inquiry is understood to be making good progress, although it remains a tricky investigation. One source described the findings so far as "pretty fishy, although not necessary something that will lead to criminal charges".

Lord Levy, the Labour Party fundraiser, has already spent two days being questioned by the police. A source said: "Lord Levy is clearly at the centre of the inquiry." It is understood the police decided to arrest Lord Levy because he is considered to be the key individual in the case and that detectives discovered that some of the people they had previously questioned under caution had failed to produce all the documents that had been requested. The police have already interviewed at least two government ministers about the cash-for-honours allegations, it was disclosed yesterday.

A spokeswoman for Lord Sainsbury of Turville, the Science minister, confirmed that he had been questioned by detectives during their investigation. In April, Lord Sainsbury faced a possible probe into an alleged breach of the ministerial code after admitting he had failed to disclose a £2m loan he had made to the Labour Party - despite publicly stating that he had.

He apologised for "unintentionally" misleading the public, blaming a mix-up between that loan and a donation - also of £2m - that he had made at about the same time.

Lord Sainsbury has an estimated fortune of between £1bn and £2bn, stemming mainly from his family's supermarket empire.

Ian McCartney, the Trade minister, has also been questioned. A spokesman for Mr McCartney said: "He voluntarily offered to speak to police. He was interviewed as a witness, but he wasn't cautioned and did not attend a police station."

Downing Street refused to disclose yesterday whether the two ministers were receiving legal advice from government lawyers - if they are, then tax-payers would be funding what is supposed to be an inquiry involving the Labour Party.

A spokeswoman for the defence minister Lord Drayson denied speculative reports on the internet that he had also been interviewed as part of the investigation.

Interviewed so far

* LORD LEVY: Arrested and twice questioned this week about his role as Tony Blair's fundraiser. Faced questions after he was named as the man who advised Sir Gulam Noon to remove details of his £250,000 loan to Labour from his nomination form for a peerage. He is also president of the Specialist Schools and Academies Trust.

* IAN McCARTNEY: Trade minister and former Labour Party chairman, who signed the nomination papers for individuals at the centre of the ''cash for peerages'' row. He signed the papers while in hospital recovering from a heart operation. He was interviewed as a witness and was not arrested by police.

* LORD SAINSBURY OF TURVILLE: Science minister, philanthropist and part of the Sainsbury supermarket family. He is one of Labour's biggest donors and loaned the party £2m before the election. He is said to have donated more than £10m since 1999. He was interviewed by police, but not under caution.

* DES SMITH: Headteacher was the first person to be arrested and bailed in the investigation after he was reported to have told an undercover reporter that people who made donations to city academies could expect to be rewarded with honours. He was a member of the Specialist Schools and Academies Trust council.