LORD LEVY was named last night as the man who told a wealthy Labour donor to keep secret a loan to the party on being nominated for a peerage.

Sir Gulam Noon was told personally by Lord Levy in a telephone conversation that he should not declare his £250,000 loan to Labour, the BBC reported.

The disclosure, which follows a report in The Times on Saturday disclosing that Sir Gulam had been advised to do so by a “senior Labour figure”, is deeply damaging to Tony Blair.

Lord Levy is the Prime Minister’s tennis partner and his personal envoy to the Middle East, as well as having acted as Labour’s main fundraiser throughout his period in office.

The Ten O’Clock News reported that Sir Gulam, who had given sums totalling £221,177 to Labour over the previous five years, was approached by Lord Levy in April 2005 — the month before the general election — with an urgent appeal for money. Sir Gulam, founder of the Noon Foods empire of ready-to-eat Indian meals – offered a donation of £50,000 to Labour, whereas Lord Levy suggested a gift of £1 million, according to the BBC.

Instead they agreed that Sir Gulam would lend the party £250,000 on commercial terms. A loophole in election law meant he would not have to make a declaration to the Electoral Commission of such a loan — unlike a donation.

On October 3 Sir Gulam received a call from Downing Street informing him that the Prime Minister had nominated him for a peerage.

The next day he received by post a form to be submitted to the House of Lords Appointments Commission that included a question on past political links and donations.

Sir Gulam filled out the form and declared the £250,000 without specifying that it was a loan, the BBC reported. He returned the completed form to Downing Street on the understanding that it would be forwarded to the commission.

The next day — October 5 — Lord Levy telephoned Sir Gulam and said that the loan did not need to be disclosed.

As The Times reported, Sir Gulam then resubmitted the form without mentioning his £250,000 loan, following Lord Levy’s instructions.

The House of Lords Appointments Commission, which vets nominations to the Lords for propriety, discovered the existence of Sir Gulam’s loan only from media reports during the “cash for peerages” scandal and rejected his nomination.

Sir Gulam appears to be exacting revenge on the party by revealing highly sensitive details of his negotiations with Lord Levy and the logistics of his own nomination for a peerage.

It remained unclear last night why Lord Levy was so keen for Sir Gulam not to declare his £250,000 loan to Labour. This was not unlawful, although the Electoral Commission has said it contravenes the “spirit” of the law requiring the declaration of political donations above £5,000. The rules were introduced by Labour.

Nor was it clear why Lord Levy preferred a loan that had to be repaid on commercial terms to a donation, although there has been speculation that Labour hoped such loans would be converted into donations later.

Three other businessmen nominated as Labour peers on the same list as Sir Gulam were revealed to have made even larger secret loans to the party to keep it afloat during the election. All have either withdrawn or had their peerages blocked and the episode is subject to a police inquiry into whether there was a breach of the law by an attempt to sell honours.

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