POLICE investigating the “cash for peerages” affair have been handed paperwork relating to Labour’s loans signed by its millionaire supporters, The Times has learnt.

They will seek interviews this month with the backers to establish whether the loan agreements — also signed by Labour officials — were illegal.

The inquiry is about to move into a new phase as detectives have finished gathering documents from party officials and government departments.

A Whitehall source said that police would move quickly so that a suspended parliamentary inquiry into the affair could resume. “We know that the police inquiry is now focused very much on loans given to political parties after 2001,” the source said.

“There is an expectation that, having got the select committee to stop their work, police are going to make progress over the next month.”

Twelve donors gave £14 million to Labour before last year’s general election. They included Sir Gulam Noon, the curry magnate, Chai Patel, the founder of the Priory clinics, Sir David Garrard and Andrew Rosenfeld, both property developers. All deny that they lent money in exchange for a promised honour. It is believed that police will also interview Lord Levy, the Labour Party’s chief fundraiser, and Matt Carter, the former general secretary.

In letters sent to donors last spring, Mr Carter outlined the terms of the loan, which ranged between 1 and 3 per cent above the base rate. The letters, seen by The Times, state: “The agreed interest rate is broadly equivalent to the party’s normal cost of funds and therefore can be considered as a commercial rate of interest.”

Police are trying to establish whether party officials broke the Political Parties, Elections and Referendums Act 2000. The Act requires donations above £5,000 to be declared. However, it does not require parties to declare any loans if they are charged an unspecified commercial interest rate.

Detectives are expected to question Nick Bowes, a Labour official responsible during the last election for ensuring the legality of donations, sources say. Police want to interview him about claims said to have been made on an internet diary alleging that Mr Blair was selling honours for cash.

The police inquiry, conducted by six detectives in Scotland Yard, will focus on political loans made after 2001, according to Whitehall officials. Senior Labour Party figures fear that the inquiry is moving closer to Lord Adonis, the Education Minister and architect of the city academies policy.

Sir Cyril Taylor, the chairman of the Specialist Schools and Academies Trust, which tries to recruit rich sponsors, admitted that Lord Adonis had met potential backers. “He [Lord Adonis] meets sponsors if there is a strong potential interest. If you are putting in a lot of energy, and a couple of million pounds, you want some attention,” Sir Cyril said.

The police investigation began last month under the Honours (Prevention of Abuses) Act 1925, which makes the sale of honours illegal. Legal experts said that anyone offering honours for gifts could also face a corruption investigation.

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