One of Labour’s most prominent backers, who vowed not to donate any more money after being dragged into the cash-for-honours inquiry, is prepared to fund a Gordon Brown-led general election campaign.

Sir Gulam Noon, the food tycoon whose nomination for a peerage was blocked after he was advised by Labour not to declare a £250,000 loan, has told The Times that he may convert the loan into a donation after being impressed by the new Prime Minister.

Although never a suspect, Sir Gulam was interviewed under caution by the police twice during the 18-month investigation. At its height he told friends that he could not contemplate donating to Labour again.

Speaking last week from his office in Queen Anne’s Gate, Central London, Sir Gulam, 71, said, however, that he was ready to return to the fold. “I have met Brown on many occasions,” he said. “He is a fine man and I have always admired the way that he steered the economy of the country.

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“At that time [of the cash-for-peerages investigation] I could not contemplate giving again. I was embroiled in a controversy. But new Labour has always been my party and I can return to it. And if it is possible to give, I will give. In fact, I am inclined to give.”

The party is still facing debts of more than £20 million, including £14 million of outstanding loans, figures from the Electoral Commission have shown.

Sir Gulam, who came to Britain from Bombay in 1966 with a few pounds and has since built up a food empire worth £70 million, has previously donated about £222,000 to Labour. He joined the party in 1995, but began donating in the late Nineties after meeting Tony Blair at a parliamentary function, he said. “New Labour wanted to free the market but also wished to introduce a minimum wage, which I supported because so many people were exploited, particularly in the catering industry,” he said. “I liked Tony, but also I liked the party’s values.”

His relationship with the party became closer and he was soon seen as one of its most regular contributors, from his companies and as an individual. He was dragged into the cash-for-honours affair in spring 2005 as new Labour desperately looked for ways to fund the general election. A prominent party figure, who has been widely reported to be Lord Levy, Blair’s fundraiser, approached Sir Gulam and asked if he would mind lending some money.

Sir Gulam said that he would be happy to make a donation, but he was persuaded instead that it would be better to give the money as a loan. Many have since suggested that this was done by Labour to hide the money from the authorities.

He was then nominated for a peerage by Downing Street in autumn 2005 and sent a House of Lords nomination form. After filling it in and sending it back to Downing Street, he was again advised by the same Labour official that he should drop all references to the loan.

Sir Gulam said that he followed these instructions, to his immense regret. “I removed it. I blame myself,” he said. “Nobody put a gun to my head. It was suggested to me and I thought, ‘Maybe they have checked their facts with their solicitors, and who am I to question Labour’. We were all caught up in a mess.”

His nomination was blocked because he omitted the loan from his form. The police interviewed Sir Gulam twice under caution as they tried to establish whether there had been a conspiracy to sell honours. Lord Levy, Ruth Turner, an adviser to Tony Blair, and Sir Christopher Evans, a donor, were arrested under honours legislation.

Although he was never a suspect, Sir Gulam’s name was spread across newspapers in connection with a political scandal. His family and friends in India were put under considerable stress, he said. “It was a fire, and a very fierce fire, and at that time no one wants to save anyone. But there were some friends who stood by me and they physically came to me and gave me help and advice. I won’t forget them. My granddaughter would call me up from her university at War-wick, worried at what had been written. My wife and daughters were hurt by some coverage. But I am a fighter. I did not like it, but knew I had done nothing wrong.”

During the 18-month police inquiry, Sir Gulam drifted away from many public functions. He told friends, as reported in The Times, that he “could no longer contemplate” giving to Labour. Instead, he dedicated himself to his charity work, such as the Noon Foundation, through which he has spent £4 million and has sponsored a mentoring scheme in Tower Hamlets.

The Crown Prosecution Service said last month that there was insufficient evidence to press charges, and cleared all those arrested of any wrongdoing. Sir Gulam said yesterday that he holds no grudges against the police, who he says were only doing their job.

As one of Britain’s most prominent Muslims – he was appointed to the Government’s Muslim Task Force after the July 7 attacks – Sir Gulam attacked the failure of the courts to ensure that Islamists such as Abu Hamza al-Masri felt the full force of the law when they came before the courts. “If someone is convicted for a terror or hate-related crime, the sentence should stand and the full force of law should apply,” he said. “For example, Hamza has been given seven years but won’t serve it. He will come out soon and be up to the same mischief.”

His words, in his first interview since the Scotland Yard inquiry into the sale of peerages collapsed in July, were welcomed by Labour. A senior Labour figure said that the party would be delighted to receive a donation from Sir Gulam. The source pointed out that the full CPS report had found that the businessman’s nomination for a peerage “had merit”. “We think very highly of him,” the figure said.

The story so far

Summer 1966 Gulam Noon arrives in Britain, aged 27, from Bombay with £50 in his pocket. Sets up food importing company and begins to sell prepackaged food

Summer 2001 donates £100,000 to Labour

June 2002 awarded knighthood for services to food

December 2002 donates £100,000 to Labour

Spring 2005 approached by Labour Party officials and asked to help to fund the general election. Offers donation, but is persuaded to provide £250,000 loan

August 2005 Sells Noon Products for £124 million

September 2005 Nominated for peerage by Downing Street

October 2005 Filled in nomination form, agreeing to leave out details of loan

March 2006 Three other lenders, Chai Patel, Barry Townsley and Sir David Garrard, are turned down for peerages by the Lords Appointments Commission. Sir Gulam asks for his nomination form to be withdrawn

June 2006 Sir Gulam is one of 12 Labour lenders questioned by police under caution

April 2007 Detectives investigating the affair hand over their main evidence to Crown Prosecution Service

July 2007 CPS announces that no one will be charged

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