Blair told police donors were being honoured for services to Labour. These documents say different

Cash for honours: papers leaked to the <i>IoS</i> pose new questions for Downing Street

When Tom Kelly, the Prime Minister's spokesman, summoned journalists to an urgent briefing in the wood-panelled room in the House of Commons press gallery last Thursday, few had an inkling of the historic announcement he was about to make. Journalists, tucking into thai curry and moussaka in Parliament's press canteen, assumed he would be providing details of the Prime Minister's trip later that day to Brussels and the Middle East.

But Mr Kelly began his briefing with a pantomime style "'Ello, 'ello, 'ello", and went on to explain that Mr Blair had just finished being questioned by detectives in Downing Street, making him the first serving prime minister to be interviewed in a criminal police inquiry.

The news was all the more surprising since, at that morning's 11am briefing, Mr Kelly told journalists that Mr Blair had no date with the police, even though at that moment they were knocking on his door.

It was a line that had been peddled for weeks - leaving journalists under the firm impression that there had been no contact between Downing Street and Scotland Yard at all.

Few thought it a coincidence that Mr Blair had chosen the busiest news day for months to see detectives. Not only were the results of the inquiry into the Princess of Wales's death announced that day, but the Government revealed that it was halting a Serious Fraud Office investigation into a multibillion pound arms deal with Saudi Arabia. Mr Kelly denied the interview was timed to "bury bad news".

Although his account of Mr Blair's statement to police was rather scanty it contained what to some - including friends of the donors - was a new twist to the cash-for-honours affair.

Mr Kelly explained that Mr Blair had told the police he had nominated each individual not because of their contribution to British society, as previously thought, but because of their services to the Labour Party. As Downing Street's note of the press briefing later explained, Mr Blair had told the police that they were given peerages because of their political work.

"The Prime Minister explained why he nominated each individual. He did so as party leader in respect of those peerages reserved for party supporters, as other party leaders do. The nominations were therefore not honours for public services but expressly party peerages given for party service," the record says.

The statement appeared to contradict Labour spokesmen's previous contention that the nominations for peerages were for their standing in society and their contribution to business education and health policy. It also flew in the face of what the donors themselves had believed.

Last March, Dr Chai Patel, founder of the Priory clinics, told BBC Radio 4 that he had been nominated following 20 years of making a serious contribution to British society, including founding a string of clinics. At the time his office confirmed this as the reason. Friends say they are "confused". "It's a bit odd," said one. "When he was first nominated he thought it was for public service."

Like the other Labour lenders that Mr Blair nominated, Dr Patel does not have a long history of working for the party. He joined Labour in 1999, and, apart from being a generous backer, is better know for his work advising on treatment of the elderly.

Sir Gulam Noon, who built a fast food empire manufacturing supermarket curries and lent Labour £250,000, seemed equally baffled. He told The Independent on Sunday last week that he assumed his nomination was for "business" and charitable work.

"I think it was for my charitable work, my building of the business," he said. "I built the company out of nothing, out of zero. [With curry] I have broken the shackles of the housewife. I donated large sums of my own earnings to the Noon Foundation - £4m." Although he has been an enthusiastic supporter of New Labour, he does not have a history of party activism and previously donated money to the Liberal Democrats.

Friends of Sir David Garrard and Barry Townsley are similarly baffled. Although Mr Townsley has been a Labour member for nine years, it is not thought that Sir David Garrard is a member.

A spokesman for Sir David Garrard and Barry Townsley said: "My recollection was they were told it was for services to education." That recollection is supported by documentation, seen by this newspaper.

Tony Blair's confidential nomination forms, prepared for the vetting committee that scrutinises peerages, say that Mr Townsley "would be [sic] active contributor to the Lords speaking on education and business matters".

The forms prepared by Downing Street set out in detail the "grounds for recommendation". None of the official citations mention services to the party.

David Garrard's form, marked "Restricted - Appointments", states that he "is a successful businessman" and founder of an education trust that contributed £2.4m to a business academy. "He is also Chairman of the London First Presidents Committee. He would make a valuable contribution to the work of the House of Lords," the citation says.

Sir Gulam Noon's official citation details his many business interests and charitable works - including being on the advisory council of the Prince's Trust.

"Sir Gulam is a well respected and successful businessman in the food production industry," the confidential documents say. "He would be an active member of the Lords bringing wide range business experience."

Dr Patel's citation explains how he has experience not only in business, health care and as a government adviser but was awarded the CBE in 1999. "His wide ranging experience will be of benefit to the House of Lords," his citation says.

While abroad, Mr Blair reiterated that he had nominated the men for "party service". But yesterday there were fresh questions about what this party service - apart from donating and lending millions - could be.

Although Sir David Garrard has been a firm supporter of city academies, this support has been related to government rather than party. Barry Townsley, while a longstanding Labour Party member, is not widely recognised as a Labour activist.

There was speculation in Whitehall that Mr Blair's form of words was designed by lawyers. Some think the police may have come to the conclusion, after interviewing dozens of witnesses, that the Labour nominees would not have been credible candidates for peerages had it not been for their huge donations or loans to Labour. All four men's peerages were, after all, rejected by the vetting body that checks if the nominees would be "credible... irrespective of any payments made to a political party or cause".

Ironically, it is another Labour lender, who did not make it to the final peers list, whom Mr Blair was specifically asked about in his police interview. Sir Christopher Evans, a biotechnology millionaire lent Labour £1m.

Police have focused on notes written by Sir Christopher which were seized by police. The notes, which are reported to record a conversation between Lord Levy and Sir Christopher, said: "W'd you like a K or a big P?" - a knighthood or a peerage.

The conversation is understood to have taken place around the time of the 2001 election and, according to one source, relates an exchange during one of Lord Levy's schmoozing sessions.

"He buttered him up," said one source, who added that it was not unusual for Labour donors to be told that they might be "the right sort of material" for the House of Lords. But a spokesman for Sir Christopher categorically denied that any honours had been offered - or solicited.

Sir Christopher and Lord Levy have already been questioned by police. Now the inquiry is focusing again on Lord Levy, who raised millions, at Mr Blair's behest. The pressure has increased on Lord Levy after the Prime Minister appeared to distance himself from his friend. Allies of Lord Levy say he is adamant that he will not carry the can for Tony Blair. Some in Downing Street are nervous that, by apparently distancing themselves from his methods, they may have pushed "Lord Cashpoint" one step too far.

Sir David Garrard

Property developer; co-owner of Minerva company before it floated in 1996. Patron of Community Service Volunteers. Previously a Tory supporter, he was knighted in 2002. Lent £2.3m. Donated £200,000 and £2.4m to a city academy in Bexley, which Tony Blair described as 'the future of education'

Barry Townsley

Stockbroker who reputedly sold his business for £10m and became chairman of the financial services company Dawnay, Day Townsley. Censured in a 1980s Stock Exchange investigation. Lent £1m. Donated 'more than £5,000' before 2001 and £6,000 since, plus £1.5m to a west London city academy

Chai Patel

Head of Priory rehabilitation clinics. Born in Uganda, he fled Idi Amin's regime. Trained as a doctor, then became a banker. Was happy to give money to Labour but says Lord Levy asked for a loan instead. Insists he never expected anything in return. Lent £1.5m. Donated 'more than £5,000' before 2001

Sir Gulam Noon

Ready-meal curry tycoon. Member of the adviser council of the Prince's Trust. Knighted in 2002. Was allegedly told by Lord Levy he should not disclose his loan to the Lords Appointments Commission when it vetted his nomination. Withdrew his name from consideration. Lent £250,000. Donated £250,000