The singer, an improbable confection of false sideburns, dyed black hair and leather, was one of the first acts signed by Michael Levy’s record company. The hit laid the foundations for the rise of “Mr Cashpoint” and Tony Blair’s election victory two decades later.

Such aspirations seemed beyond the reach of a 30-year-old former accountant who hailed from an impoverished background in London’s East End, although Stardust recalled Levy as “a determined little whiz-kid” who reminded him of Brian Epstein, the Beatles’ manager.

Indeed, Levy’s life is a story of bucking the odds. The single room in Stoke Newington shared by all his family until he was nine, with its outside lavatory, is a far cry from the £4m hacienda-style north London villa where he now lives with his wife Gilda.

It was the scene of a raid by masked men who attacked the couple in 2003 and stole £80,000 after barricading them in the cellar, handcuffing them and beating them over the head. “I thought we were going to be burnt alive when they poured bleach over us,” he told The Sunday Times. “My wife has been scarred [emotionally]; her health has suffered.”

Another paradox. Levy is a pillar of British Judaism and a leading international Zionist who has served as Blair’s special envoy to the Middle East, where he is credited with brokering talks between Palestinian and Israeli leaders — much to the irritation of British foreign secretaries such as Robin Cook, who would not speak to him, and Jack Straw, who keeps his distance. Levy has explained the apparent contradiction by stating: “I am an absolute believer in the state of Israel, but there must be a Palestinian state.”

Levy came from a devoutly religious family. Born on July 11, 1944 he was the son of Samuel, a synagogue attendant, and Annie. His grandfather was a rabbi.

Labour’s chief fundraiser was almost invisible until The Sunday Times reported in 2000 that he had paid just £5,000 in income tax the previous year. He sought a gagging order to prevent the publication of his tax affairs but a High Court judge ruled that it was in the public interest. From then on he was known as “Mr Cashpoint”.

A quiet, home-loving man, he morphs into a businessman with a reputation for ruthlessness and as a fundraiser of irresistible charm. Tanned, carefully coiffured and standing 5ft 6in in his stacked-heel shoes, he radiates confidence and bonhomie.

A senior Labour official once described his sales pitch to a potential donor: “It’s a completely cold, hard sell, just like a Hoover salesman. Everyone knows he’s doing it. They guy knows it’s being done to him, but it’s all fine.”

Others never forget the firmness of his handshake. “It’s fierce enough to take your arm off,” said one. And he does not relinquish his grip readily. His Friday night suppers and Saturday night VIP dinners mixed cabinet ministers with donors and showbiz folk. “It’s showing the goods,” Levy once explained. “It’s done on a fairly personal basis — ‘Come over for dinner, I’m having a few people’.”

The bait was sometimes a game of tennis with the hint that Blair would turn up. Often he did, clinching the donor’s munificence. Levy may consider that he and Blair are “like brothers”, but they are competitive tennis partners. “Neither of us likes to lose,” he confessed. “At the beginning I won.”

There was not much tennis in the East End, where Levy became head boy at Fleetwood Primary school before attending Hackney Downs Grammar. Leaving school at 16, his escape route was accountancy, which led to a basement office in York Street, London, where he set up a record company called Magnet.

On the back of Stardust’s hits, Levy signed a string of successful acts, including Chris Rea, Dollar, Darts, Guys and Dolls and Bad Manners. Rea has described his former boss as “one of the hardest bastards I have ever met — but I would leave my children with him rather than anyone else”.

At one stage Magnet had 84% of record sales in Britain but in 1988, after 15 years, Levy sold out to Warner Brothers for £10m. The sale has been attributed to the death of his mother. “He loved her dearly,” said a friend. He became convinced she was sending him a message to turn his talents from pop music to good causes.

The opportunity came in 1990 when he received an appeal for help by Lord Young, the former Conservative minister and confidant of Margaret Thatcher, who was presiding over the charity Jewish Care. A year later Levy became chairman of Jewish Care, transforming its fortunes into its £36m current income. The Jerusalem Post hailed him as “undoubtedly the notional leader of British Jewry”.

He stepped into an even more powerful inner circle in 1994. At a dinner party given at the Israeli embassy, Levy met Blair. The two had a common friend in Eldred Tabachnik, a senior barrister at the chambers where Blair trained.

Levy was entranced by Blair’s drive and religious commitment. Blair, a politician spellbound by wealth, was in thrall to a rich man whose prodigious fundraising ability had definite promise. They became friends.

Hitching himself to Blair’s star, Levy became the architect of a system of “blind trusts” that channelled funds into Blair’s private office without the identities of rich benefactors being disclosed.

After raising £12m towards Labour’s landslide victory in 1997, Levy was rewarded with a peerage. Blair’s debt of gratitude to Levy is profound. His crucial accomplishment has been to cut Labour’s dependence on trade union funding so that the party’s reliance has declined from two-thirds in 1992 to about a quarter now.

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