Cash-for-peerages: police reveal scale of inquiry as files go to CPS

Police investigating the cash-for-peerages row said 48 people had been questioned so far and 13 had been interviewed under caution, as the fallout from the dramatic arrest of Lord Levy on Wednesday continued to transfix Westminster. Three individuals, believed to be among the 12 leading businessmen who gave Labour secret loans totalling £13.9m, have refused to co-operate with the inquiry and may be arrested to force them to comply.

John Yates, the Metro-politan assistant deputy commissioner in charge of the inquiry, said that two files had been sent to the Crown Prosecution Service (CPS). He did not rule out the possibility that Tony Blair could be questioned.

Yesterday, Lord Levy, known as "Lord Cashpoint", was called in for further questioning and through his solicitor angrily protested at his treatment and his innocence. He condemned his arrest as "unnecessary, disproportionate and, as has been described by others, entirely theatrical". But he told reporters: "I'm feeling very well. I will now carry on with my usual activities and my usual role in life."

In the wake of the arrest of Lord Levy, the Labour party fundraiser and Tony Blair's close friend, the extent of the inquiry underlined fears in Downing Street that the police inquiry was growing into a political nightmare for the Prime Minister.

A left-wing Labour MP, John McDonnell, leader of the 40-strong Campaign Group, will exploit the unrest on Labour's benches today by announcing he is prepared to run for the leadership, if Mr Blair can be forced to quit.

And a Tory member of the Commons Public Administration Committee, Grant Shapps, said Mr Yates had warned the committee against calling Mr Blair to give evidence for their own inquiry, which has been suspended to avoid tainting possible proceedings. "I asked Mr Yates whether he would be happy to let us interview Mr Blair," Mr Shapps said. "He said, 'Absolutely not'. I think that is really interesting. He was definitely not ruling out interviewing the Prime Minister."

The Labour chairman of the committee, Tony Wright, also indicated that he believed Mr Blair could become the first prime minister in years to face the humiliation of police questioning. "He [Mr Yates] didn't seem like a man who would balk at interviewing anybody," Mr Wright said. "He keeps saying he will go anywhere this investigation leads."

Mr Yates was challenged by the MPs over the criticism made by the former home secretary David Blunkett that the arrest of Lord Levy was "theatrical". Mr Wright said the police wanted very strongly to repudiate suggestions Lord Levy's arrest was a "symbolic act" to show they were serious.

"They wanted to impress on us that this was absolutely integral to their investigation and they were very cross about the way it was reported yesterday," Mr Wright said.

"They said it had been made clear to Lord Levy and his legal advisers that this was what was going to happen before they went to the police station, so it couldnot be said to be any kind of surprise."

The team of 10 officers under Mr Yates is expected to be able to end their investigations by October, said Mr Wright. He said that the CPS told the committee that it would "make it a priority to decide whether this is to go any further".

The four major donors at the centre of the row, Sir Gulam Noon, the "curry king", Chai Patel, founder of the Priory clinics, the property tycoon Sir David Garrard, and Barry Townsley, a stockbroker, whose peerage nominations were blocked, or in the case of Mr Townsley, withdrawn, were said to have refused to answer questions directly by police.

They were each said to have been interviewed under caution at their solicitors' offices and to have limited their answers to written statements.

The police investigation covers claims that Sir Gulam Noon was told by Lord Levy to remove the declaration that he had made a £250,000 loan to the party and resubmit his nomination papers for a peerage to Downing Street.

Mr Blair has repeatedly denied selling peerages, in breach of the 1925 Honours (Prevention of Abuses) Act introduced in the wake of an honours-for-sale scandal caused by Lloyd George.