A BUSINESSMAN who secretly lent £1 million to the Labour Party was made chairman of one of Gordon Brown’s flagship projects just weeks after handing over the money, The Times has learnt.

Rod Aldridge, who resigned yesterday as executive chairman of the technology company Capita, will launch the £150 million youth community service scheme with the Chancellor in May.

The timing of his appointment links Mr Brown for the first time with the “loans-for-honours” affair that has engulfed the Prime Minister.

However, when asked on the Radio 4 Today programme yesterday if he was aware of the loans, Mr Brown said: “I have got to have a very clear divide between my position as Chancellor dealing with business all the time and political donations. I have never involved myself at any time in this business of political donations.”

Capita, founded by Mr Aldridge, has been awarded billions of pounds of public sector contracts since Labour came to power, raising the value of the company from £100 million to £2.9 billion.

Mr Aldridge’s resignation came after a commercial backlash to the disclosure that he was one of the 12 businessmen who had made loans of £14 million to the Labour Party. Three of the lenders have had their nominations for peerages blocked by the House of Lords Appointments Commission, which was not told by Downing Street about the financial links.

Mr Aldridge, who has not been nominated for an honour, handed over £1 million to the Labour Party at the end of October. Weeks later he was made head of the Chancellor’s youth community service scheme, which they will launch together with Charles Clarke, the Home Secretary. The Chancellor praised the scheme in his Budget on Wednesday.

It will operate in direct competition to the Conservative leader David Cameron’s proposed national volunteer scheme for young people. The scheme is seen as a defining project in Mr Brown’s expected premiership.

In a new twist on the controversy The Times has learnt that Lord Levy, the Prime Minister’s personal fundraiser, faces questioning within three weeks by detectives investigating the allegation of the sale of peerages by Labour.

Detectives have already written to the party and to donors requesting documents and information. Senior officers said that they were moving as quickly as possible because of the “inevitable public interest”.

The row left Mr Blair even more isolated when Jack Dromey, the Labour Party treasurer and close ally of the Chancellor, revealed that he had not been told about the loans. He demanded a full inquiry by the party’s National Executive Committee.

Harriet Harman, the Constitutional Affairs Minister, who is married to Mr Dromey, was abruptly withdrawn by the Labour Party from the BBC One Question Time programme last night.

Chris Grayling, the Tory transport spokesman, challenged Mr Brown’s version of events. He said: “Gordon Brown has said that he did not know about the loans issue and the financial links between Mr Aldridge and the Labour Party.

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