AS MORTAR rounds and rocket bombs exploded around Israel’s borders on Wednesday, Tony Blair’s personal envoy to the Middle East was neither huddled away in urgent talks nor racing to Tel Aviv. Instead, Lord Levy was at Colindale police station where he had been arrested in the loans-for-peerages inquiry.

His twin roles as prime ministerial envoy and Labour’s chief fundraiser have long been one of the curiosities of this Government. He has brought his qualities of energy, personal discretion and loyalty to both, along with a less desirable talent for engendering antipathy, and sometimes contempt, among many of the people he meets along the way.

He is savvy enough to know what his critics say about him and his job in the Middle East. At best, they regard it as a sop to his vanity so that he stays doing what he does to keep the cash rolling in for Labour. At worst, they regard it as a grotesque appointment that has left British foreign policy in the region looking imbalanced.

Lord Levy genuinely believes that his skills and contacts in the region can make a difference. He once told The Times: “If it was just a little pat on the back for me, I would not be doing it. I have too much pride for that.” Indeed, the pride of this 62-year-old self-made man who grew up poor in Hackney but made a fortune as a pop impresario, should not be underestimated. It is, of course, a matter of fact that the men and occasionally women whom he persuaded to donate more than £100million to Labour over the past dozen years have often become peers shortly afterwards. But these big donors have, more often than not, been highly-regarded individuals who like him have made money and now “want to give something back”. And, if giving money to new Labour is a noble cause, how much more noble can you get than being ennobled and dedicating your talents to public service in the House of Lords?

Lord Levy may well have been responsible for sparking Mr Blair’s interest in the Middle East peace process. He has a home in Israel and a life-long commitment to the country’s Labour Party which has been continued by his son, Daniel, who used to work for Yossi Beilin, the former Justice Minister.

He has made 75 foreign trips in his envoy role, representing the Prime Minister in meetings with almost all the big players in the region’s politics. His appointment was resented among the Arabists in the diplomatic corps, some of whom believed that Lord Levy, as a Jew, would be a partisan supporter of Israel. Two years ago his influence was denounced in a letter circulated by a number of former ambassadors.

Sir Christopher Meyer, Britain’s former Ambassador in Washington, dismissed him as one of “Blair’s pygmies”. But, grudgingly, most people at the Foreign Office say that Lord Levy had a good understanding of the issues and was scrupulously fair in all his dealings with Arab and Israeli leaders. For a man who has always been deeply worried about his own security, he has bravely flown into Arab capitals regarded as dangerous for Jews.

“I find him a thorough professional in dealing with his brief,” one senior British diplomat said. It was also well understood that his views were influential at Downing Street — and on several occasions he helped to patch up relations after Robin Cook, the former Foreign Secretary, had angered the Israelis. But his efforts at negotiation have not been successful. At one stage Lord Levy tried to win the ear of Israel’s most implacable enemy, Syria. This led to an awkward visit by Mr Blair to Damascus in 2001 and a return visit to London by the Syrian President a year later. Since then, however, relations have cooled markedly.

Lord Levy met Yassir Arafat no less than 11 times, but his efforts did not win praise in Israel — which several times criticised him for talking to Palestinian ministers without co-ordinating the trip with Ariel Sharon’s Government.

In recent years he has travelled much less frequently to the region. This is partly because Britain’s influence in the Middle East has been compromised by Arab hostility to the Iraq war. Lord Levy has become uncharacteristically pessimistic, not only about making progress in the Middle East but also, since last year’s election, has become exhausted, even frustrated, with his fund-raising role. He had, apparently, opposed the policy of shifting from donations to raising cash through undeclared loans — a practice pioneered by the Conservatives — and bitterly resents being implicated in the subsequent scandal.

But no one should expect him to quit either of his roles unless Mr Blair specifically tells him. Lord Levy typically closes any discussion about his position by saying: “Tony really wants me to do it and he needs guys like me around him at the moment.”

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