POLICE are expected to postpone plans to interview the Prime Minister over “cash for honours” allegations because Lord Levy has refused to answer their questions.

Detectives, who had hoped to interview Tony Blair by the end of September, could stall their plans because Lord Levy has read them a written statement and said “no comment” when they probed further.

As a result, Whitehall sources claimed yesterday that plans to interview Mr Blair by the end of September could be put on hold, forcing the cost of the inquiry to spiral.

The disclosure will prompt speculation that Downing Street or the Labour Party may be behind the stalling tactic, hoping that the police inquiry will shudder to a halt.

A senior Whitehall source said that the police could not proceed quickly without Lord Levy’s responses. “Lord Levy’s decision to take up a ‘no comment’ position has put police in a difficult place,” the source said. “The cost of the investigation will inevitably climb because they will have to seek other ways of obtaining information they believe he has access to.

“They hoped to interview the Prime Minister before Labour’s conference, but that will almost certainly be changed now,” the source added.

Police arrested Lord Levy 12 days ago, when he was questioned at a North London police station. They searched his London home and seized documents and computer files. He was quizzed by officers over his role in securing £14 million in loans for Labour from four millionaire donors who had been recommended for peerages.

The source said that Lord Levy, who is also the Prime Minister’s tennis partner, “read from a prepared statement and then said ‘no comment’ to everything he was asked”.

The Times revealed 16 days ago that Sir Gulam Noon had been asked by a Labour official to hide a £250,000 loan to the party by omitting details from an official House of Lords nomination form. Two days later, it emerged that Lord Levy was that official. Two days after that, he was arrested.

Lord Levy denies any wrongdoing in his efforts to raise money for Labour. His spokesman yesterday declined to comment because of the on-going police inquiry.

Prosecution sources have previously said that detectives planned to interview Mr Blair before the political conference season, and his closest advisers concede that after the arrest of Lord Levy, an interview is inevitable. Jonathan Powell, Mr Blair’s chief of staff and longest-serving adviser, is expecting to be interviewed at the same time.

The Prime Minister’s supporters had hoped that the conference in Manchester would help to drive up the party’s sluggish opinion poll ratings. “The last thing we need is for police to turn up and to question us just as we are returning to Westminster,” one official said.

MPs loyal to Mr Blair are eager to portray the arrest of Lord Levy as a theatrical stunt. They fear there will be a temptation for the police to stage a similar event with the Prime Minister.

The Tories may also face a police investigation over allegations that they secretly banked a “soft” loan provided below bank interest rates, it emerged yesterday.

A company controlled by Malcolm Scott, a treasurer for the Scottish Tories, loaned £200,000 to the party with interest payable at a quarter of 1 per cent per annum.

Legislation introduced in 2001 states that any loans not on commercial terms are deemed gifts and must be publicly declared to the Electoral Commission.

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