A LOOMING financial crisis for the Labour Party has been averted by the generosity of the businessmen whose £14 million in loans prompted the cash for peerages investigation.

Only 2 of the 12 businessmen are demanding repayment of their loans on the date originally agreed, to the relief of the party leadership.

The ten others have agreed to reschedule repayment to “future periods”, according to the Labour Party’s annual accounts, which were published yesterday by the Electoral Commission.

Sir Gulam Noon, the curry magnate who was asked by Lord Levy, Tony Blair’s personal fundraiser, to remove details of his £250,000 loan from his submission to the House of Lords Appointments Commission, wants his money back on the agreed date. Sir Gulam’s peerage was blocked by the commission after it discovered from a report in The Times that he had made the secret loan.

Lord Levy was arrested last week by the police. He has protested his innocence.

The report reveals that interest on the loans, which is being charged at 6.5 per cent and 6.75 per cent, 2 and 2¼ points above the Bank of England rate, had reached £436,000 by the end of last year. Sir David Garrard, the property developer whose peerage was also blocked, has received £104,000 interest in the past year from the cash-strapped Labour Party.

The precise nature of the loans from the businessmen is at the centre of the Scotland Yard investigation into whether peerages were sold for cash by the Labour and Conservative parties.

The loans, which were not disclosed to the House of Lords Appointments Commission by the Labour Party, have to be genuinely commercial to avoid disclosure under election law passed in 2000.

As The Times reported on Saturday, the report shows that Labour’s debts more than quadrupled last year from £6.4 million at the end of 2004 to £27.2 million in 2005.

The £18 million cost of fighting the general election last year is responsible. However, Labour is still £10 million more in debt than it was in the same period after the 2001 election.

The submission to the Electoral Commission confirmed that the party had received £13.95 million in loans, including £2 million in March from Richard Caring, the owner of the London restaurant The Ivy.

As The Times reported last week, Mr Caring is one of three businessmen who declined to be interviewed by the police in the inquiry, although his solicitors supplied any paperwork that was requested.

The report said that while two of the unnamed lenders said they wanted to be repaid within a six or 12-month period, the others had agreed to reschedule their loans to “future periods”.

The Tories reported a deficit of £15 million and overall debts of £26.3 million, compared with the party’s £3.1 million debt at the end of 2004.

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