POLICE investigating the cash for honours scandal seized evidence that Downing Street had plotted to hand peerages to eight of the 12 businessmen who had bankrolled Labour’s 2005 election campaign.

A draft honours list, drawn up in September 2005, showed that the plan to offer peerages to businessmen who had loaned Labour millions of pounds had involved twice as many lenders as previously disclosed.

Scotland Yard discovered that every Labour lender who was eligible for a seat in the House of Lords was initially nominated in lists compiled for Tony Blair by his top aides.

Sir Christopher Evans, the biotechnology entrepreneur, Rod Aldridge, former executive chairman of Capita, Derek Tul-lett, the broker, and Andrew Rosenfeld, chairman of Minerva, were all on an internal Downing Street peerages list. Until now the names of only four lenders – Sir David Garrard, Barry Towns-ley, Chai Patel and Sir Gulam Noon – were known to have been put forward.

The Sunday Times has also discovered that there was a second key piece of evidence – a diary kept by Evans that allegedly details a series of meetings at the House of Lords in 2004 with Lord Levy, Blair’s chief fundraiser, to discuss a peerage.

One well-placed Crown Prosecution Service (CPS) source said the diary was “dynamite” and provided “spectacular” evidence of an alleged “agreement” for Evans to be ennobled in return for a £1m loan.

Evans’s name was removed from the honours list after Downing Street discovered that his company was the subject of an investigation by the Serious Fraud Office.

A CPS official said that these two pieces of evidence formed the core of the 16-month police investigation, which the Yard believed until recently would lead to charges against key Downing Street aides.

However, the investigation was effectively halted at a meeting on July 4 when a leading government barrister, David Perry QC, ruled that the diary was not admissible as evidence.

Perry also said the police must have evidence of an “unambiguous agreement” showing that the financial backers gave money only on the explicit understanding that they would be honoured in return. The CPS announced last week it would not be charging anyone.

The decision followed a criminal investigation that led to the arrest of Levy and Ruth Turner, Blair’s director of government relations. Blair himself was questioned three times by police.

Government insiders revealed that the police were shocked at the decision not to prosecute. An official said the police and the CPS had worked side by side on the case for 18 months until there was a “sudden change that pulled the plug”.

The official said: “All those eight people gave massive loans, then shortly after they all appeared on No 10’s peerages list. It looked pretty odd, to say the least. Were the Met right to investigate it? Yes, they f****** were.”

Assistant Commissioner John Yates, who led the investigation, is expected to be called this Thursday before the Metropolitan Police Authority, which is reviewing the inquiry. He may be asked to disclose evidence which had led his team and CPS advisers to be so confident.

This is understood to include details of at least three drafts of the working peerage list drawn up by Downing Street aides in September 2005.

Police obtained the document last summer after which Yates told MPs he had uncovered “significant and valuable” evidence not yet in the public domain.

The document revealed that eight people were on an internal peerage list. This was hinted at in the CPS’s formal-document explaining its decision on Friday. It is understood police obtained information on how Levy was involved in supporting names who were to be on the list.

Drafts of the list were then compiled by Turner, John McTernan and Jonathan Pow-ell, Tony Blair’s chief of staff. Detectives also studied e-mails sent during its compilation which referred to the potential nominees’ loans to the party.

The other four who loaned Labour money were ineligible for peerages as they live abroad or had already been ennobled.

Government sources revealed Evans’s diaries were central to the investigation. The Sunday Times has established that there are entries apparently recording discussions between Evans and Levy in 2004. In these meetings, the diaries allegedly explicitly link the offer of a loan to the promise of a peerage. Levy told police he had never made any such offer.

“If those diaries ever get into the public domain, the effect will be spectacular,” said one person who has read them.

Evans’s spokesman said yesterday no such discussion had taken place, adding: “The CPS judgment was crystal clear – there was no evidence of wrongdoing and the CPS explained that in some detail. That is the end of the story.”

Evans himself attacked Labour for abandoning him during the inquiry. Asked if the party had been supportive, he told a Sunday newspaper: “The short answer is no,” adding that some in the party considered him and the others “dispensable pawns”.

Sarah Helm, Powell’s wife, described the early morning police raid on Turner during the investigation as “Gestapo tactics. Pick on the vulnerable, preferably a single woman living alone”.

Additional reporting: Holly Watt

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