What was once assumed to be a magisterial process has been laid bare by the police investigation as a tarnished affair in which party coffers play as important a role as personal achievements and integrity.

The dawn arrest on Friday of Ruth Turner, the government’s director of government relations, is the latest attempt by John Yates, the police officer heading the inquiry, to further unlock these deliberations.

Crucially, detectives have already established that Lord Levy, Labour’s most successful fundraiser, was involved after the last election in an informal role in helping to draw up the political honours list for Tony Blair. Perhaps unsurprisingly, four wealthy businessmen who had been persuaded to lend huge sums of money secretly to Labour had been recommended for peerages.

“Levy insists he has never been copied into any e-mails or other documents on the honours lists,” said one source. “But he accepts that he has been repeatedly asked for his advice.”

So were the nominations, which were subsequently blocked, simply a reward for service to the Labour party or were they an agreed payback in an unlawful deal to help to fund Blair’s last election? At the heart of the process of proposing political nominees for the House of Lords are Blair, Jonathan Powell, the Downing Street chief of staff, Turner and John McTernan, the director of political relations. Levy, who in 2005 was speaking to Powell up to four times a day, acts in an advisory role. Dissecting these deliberations has proved to be challenging, since Blair and Levy never use e-mails and conversations are often not minuted.

Despite these problems there have been some breakthroughs, including a note in which one donor appears to be speculating on getting “a K [knighthood] or a big P [peerage]?”.

There has, however, been frustration among the detectives at what they suspect has been the reluctance of some Labour officials to provide full and frank disclosure. While relations with those who work inside Downing Street have been formal and cordial for most of the inquiry, Scotland Yard decided last week that it was time for more con-frontational tactics.

At 6.30am on Friday, four police officers arrived unannounced at Turner’s London home. She was arrested in connection with alleged offences under the Honours (Prevention of Abuses) Act 1925 and also on suspicion of perverting the course of justice.

Turner, 36, is the first government official to be arrested in the inquiry. It also reveals a new line of investigation — looking at a potential cover-up rather than the crime.

A senior police source said: “This moves the inquiry into a different dimension. It is sometimes the actions of people after a [suspected] crime and their interaction with the police that can make matters worse.”

Whatever Turner’s possible role in any suspected cover-up, the decision to arrest her has sparked a new row between Labour and the police. With the apparent sanction of Downing Street, ministers and party stalwarts have been berating detectives for unnecessary “theatrics”.

A senior government insider, who is close to Turner, said: “The mood has been like thunder. This is a single woman living on her own. It was totally out of order. It strikes me as old-fashioned intimidation and bully-boy tactics. They are behaving like the secret police.”

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