THE Labour Party is facing a £10 million hole in its finances because the majority of its rich benefactors are demanding the repayment of their loans.

More than half the 12 supporters contacted by The Times were adamant that they would expect their money to be repaid, with interest at one percentage point above the base rate, as agreed with Lord Levy, who is the Prime Minister’s personal fundraiser. Almost £5 million will have to be repaid by October at the time of the Labour Party conference.

Labour’s ruling body told Tony Blair at a heated meeting yesterday that it wanted an end to Lord Levy’s secretive fundraising activities. The peer, Mr Blair’s tennis partner and chief fundraiser, will have to report back to the National Executive Committee in a move seen as a flexing of union muscle.

One Cabinet minister told The Times that the calling in of loans combined with bad publicity over their disclosure caused real difficulty to Labour finances. The use of loans rather than donations was “not clever”, a clear sign of Cabinet-level anger over the secret arrangements exposed by Jack Dromey, the party treasurer.

Charles Clarke, the Home Secretary, is understood to have used a private lunch with reporters in Westminster to question Mr Dromey’s capability as treasurer. Mr Clarke was quoted as saying that Mr Dromey’s lack of knowledge of the loans meant “you have to wonder how well he was doing his work”. He said that any competent treasurer, even an honorary one, looked at the finances of organisations that he or she was involved in.

The biggest loan, £2.3 million from Sir David Garrard, 67, a former Tory donor, is due to be repaid in August. A spokeswoman for Sir David, a retired property developer who lives much of the year in Geneva, said: “He wants the loan repaid.” Sir David, who also gave a £200,000 donation and £2.5 million to Mr Blair’s city academy scheme, has had his peerage blocked.

Rod Aldridge, 48, the founding chairman of Capita, the support services group, made a 12-month £1 million loan in October. He also gave £2 million to city academies. A spokesman said: “It is a commercial arrangement, which will be repaid.”

Chai Patel, 51, the founder of the Priory Clinic, who lent £1.5 million in August, is due to be repaid in August. Dr Patel said: “I am expecting to have the money repaid. But, if the party needs the money, I will consider ways of financing it.” His peerage nomination has been blocked.

Sir Christopher Evans, 48, whose Merlin Biosciences company is under investigation by the Serious Fraud Office, gave the party £1 million, which is due to be given back next year. A spokesman for Sir Christopher said: “He expects full repayment with interest.”

Even Lord Sainsbury of Turville, 65, the Science Minister, is not expected to convert his two-year £2 million loan before the election into a donation. A Labour Party spokesman said: “We are expecting to repay it as agreed.”

Barry Townsley, 59, made a £1 million loan in April last year. A spokesman for the financier said: “He will expect the money to be repaid in the normal way.” Mr Townsley’s peerage nomination has been blocked.

Sir Gulam Noon, 70, who was devastated to have his peerage blocked after the disclosure that he had made a £250,000 loan, wants his money back.

Sir Jeremy Beecham, the chairman of the NEC, said that the committee had not been told about the loans and still did not know whose idea they were. The Prime Minister left the meeting before a statement was agreed recommending that “the NEC resume its rightful responsibility for oversight of all matters of party funding and financing”. Mr Blair told the NEC that the move to loans had been necessary to fight the Conservatives pound for pound at the last election.

The Labour Party is close to selling the lease of its headquarters in Westminster for £6 million in a bid to reduce the debt, it emerged yesterday.

Scotland Yard last night said that it was to investigate allegations of honours given by Labour in return for loans or donations. Deputy Assistant Commissioner John Yates will lead a Specialist Crime Directorate inquiry into three complaints, including allegations made by Scottish National Party and Plaid Cymru MPs.

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