It dwarfs the £14 million in loans negotiated for the Labour Party by Lord Levy, Tony Blair’s fundraiser, and finally admitted by the party yesterday. The revelation of the Tory figure will cause embarrassment for David Cameron.

The Times also understands that a fourth businessman donor nominated by Mr Blair in the imminent list of working peers made a loan to Labour last year. Sir Gulam Noon, 70, an Indian food magnate, is said to have lent £250,000.

Unlike three other nominees who provided loans, believed to total £3.5 million, Sir Gulam has not been blocked by the Lords Appointments Commission.

The Times has been told by an informed source that the other three, Barry Townsley, Sir David Garrard and Chai Patel, were not blocked by the commission because they lent money to Labour, but for other reasons. The commission did not know about the loans, it is understood.

The Labour Party’s failure to tell it about the loan from Sir Gulam will irritate the commission as it requires details of all financial links between nominees for a peerage and political parties that propose them. But Labour will have informed the commission about past donations made by Sir Gulam so it will have been aware that there were long-standing financial links.

The commission’s objections to Dr Patel, Sir David and Mr Townsley have nothing to do with their combined £4.5 million of loans. The first time the commission knew about them was when its members read about the loans in The Times after the commission had informed Downing Street of its objections to the peerages.

The announcement by the Labour Party that the loans totalled £13.9 million, much more than thought since the row broke, set off a frantic media search for the lenders.

By last night the mystery had not been cleared up. Among those refusing to say was Lord Sainsbury of Turville, the Science Minister, who has given the party more than £6 million.

In a sign of the turmoil that the loans have created inside the Labour Party, Ian McCartney, the chairman, wrote to all Labour MPs saying that “every single penny raised was used on delivering election victories for Labour”. He acknowledged that some MPs were unhappy, but said that the party acted within electoral law at all times.

Conservative Central Office this week ordered its MPs not to go on the attack over the controversy. The sheer scale of its loans, amassed in the run-up to last year’s general election, explains why. Details of the loans, but not the lenders, will be contained in the party’s annual report, which will be published in the summer. They will gloss over a deficit of about £12 million last year, one of the biggest on record for the Tory party.

Michael Howard plunged the party deep into debt by spending £17 million on the election campaign in addition to the £14 million annual running costs last year when it raised just under £20 million in conventional donations.

The loans, secured by Jonathan Marland, the Tory party treasurer, were spread among a dozen supporters. Lord Ashcroft, the former Tory party treasurer, has declared loans of £3.5 million. The Times disclosed last year that Lord Laidlaw of Rothiemay, who sold his conference events company last year for £768 million, was a second big lender. The Tory party was unable or unwilling yesterday to disclose the identities of the lenders or whether any of them had been, or would be, nominated for peerages.

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