Police investigating alleged corruption by Britain’s biggest defence company sought access to Downing Street’s computer system to trawl for e-mails sent by and to Jonathan Powell, Tony Blair’s chief of staff.

They suspected that Lord Powell, his brother, an adviser to BAE Systems, the firm at the centre of the inquiry, was lobbying Downing Street aides to have the investigation stopped.

They approached officers investigating the cash for honours scandal, which had access to Downing Street e-mails, to see if they could trace e-mails between the Powell brothers.

They were looking for evidence that individuals might have tried to influence the outcome of the police investigation.

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This weekend, Charles Powell, a former foreign policy adviser to Margaret Thatcher, said he had discussed the investigation with “senior government officials” and that it was “perfectly possible” these included his brother.

Access to the e-mails was denied for legal reasons. However, arms campaigners are expected to press the government for full details of the exchanges in a High Court hearing later this year.

The revelation is another setback for Jonathan Powell, Blair’s most senior aide, who has been interviewed by Yard detectives investigating separate claims that there was an attempt to pervert the course of justice in the cash-for-honours inquiry.

Jonathan Powell played a key part in the events leading up to the government’s decision to halt an investigation by the Serious Fraud Office (SFO) into whether BAE Systems paid bribes to senior members of the Saudi Arabian royal family.

The bribes are alleged to have been paid by BAE to encourage the Saudis to continue buying fighter jets in a £40 billion arms deal known as Al-Yamamah.

Lord Powell, his older brother, said he had “occasionally” spoken to both BAE and the Saudi royal family on aspects of the investigation.

A Downing Street spokesman insisted yesterday that Jonathan Powell did not discuss the case with his brother. “The fact that they are brothers is therefore totally irrelevant.”

The decision to halt the probe into BAE was taken on the grounds that it would harm Britain’s national interest – a claim that Lord Powell said last week he had previously “flagged up” to senior government officials.

After the SFO investigation was halted, detectives became suspicious about BAE’s connections to No 10 staff, notably Jonathan Powell.

The Sunday Times has established that Ministry of Defence fraud squad officers held a meeting with Scotland Yard’s cash-for-honours team – led by Assistant Commissioner John Yates – late last year.

A senior Whitehall official disclosed that the fraud squad suspected that Lord Powell was acting as a “back channel” to lobby his brother and other government officials to get the police inquiry stopped.

Lord Powell became an adviser to BAE Systems in 2003 – at about the time concerns were first aired over alleged bribery in the awarding of the £40 billion contract to BAE by Saudi Arabia.

Lord Powell also acts as an adviser to Wafic Said, who helped to broker the Saudi deal.

One Whitehall official familiar with the case disclosed that the SFO ran a trace on a mobile telephone belonging to Sir Richard Evans, the former BAE chairman who was interviewed twice – in 2005 and 2006.

The official said: “They [the detectives working with the SFO] sent an officer to see the Yates team. They suspected there could be documents that showed that Evans had access to Downing Street. We knew Evans called Lord Powell and we suspected there was a back channel.”

The sources said the Yates team told the SFO the Yard did have the right to tap into the Downing Street servers.

However, it was only allowed “limited access”, enabling them to search for key words – after legal approval had been given. But the Yard said that it would be “illegal” for them to provide the Ministry of Defence police with access to No 10 e-mails.

Lord Powell said he had discussed the SFO inquiry with “senior officials” in the MoD and the Cabinet office – understood to be a reference to Sir Gus O’Donnell, the cabinet secretary.

But Lord Powell said he could not recall if he had discussed the matter with his brother.

“It’s perfectly possible. If you were told that, then you can print it. I mean I honestly can’t remember...We discussed all sorts of things.”

He added that the contents of discussions with members of his family were “sacrosanct”.

Under the Shawcross procedure, the government can drop a criminal investigation if the attorney-general decides it is not in the national interest.

Lord Powell added: “I do remember talking to senior officials about Shawcross. I flagged it up but I can’t say I was very original in doing so. I don’t remember speaking to Jonathan about the Shawcross exercise. I can’t absolutely swear that I never did, but I don’t think so.”

Tony Blair and Lord Goldsmith, the attorney-general, relied on the precedent when announcing that the two-year criminal inquiry into the Saudi arms deal was being dropped last December.

Critics accused the government of bowing to Saudi “blackmail” and making the decision on economic grounds.

The move caused outrage. It was one of the few times the Shawcross procedure has been used to abandon a criminal investigation in the national interest since 1951.

The Organisation for Economic Cooperation and Development criticised it and American diplomats issued a formal protest. Last week the Swiss federal prosecutor announced a criminal investigation into secret bank accounts said to have been linked to BAE’s Saudi arms deal.

The decision to drop the probe is being challenged in an application for a High Court judicial review filed by antiarms company campaigners.

The court action, due to be heard in the summer, is now expected to probe the involvement of the Powell brothers.

Both men were closely involved in the chain of events that led to the decision to drop the corruption investigation.

Jonathan Powell chaired key meetings with O’Donnell and others to steer Downing Street strategy after the Saudis threatened to end the arms contract and suspend diplomatic and intelligence ties.

The Sunday Times reported last month that Jonathan Powell was facing the possibility that he may be charged with perverting the course of justice in the cash-for-honours affair.

He is thought to have attended a meeting at which Lord Levy, Blair’s chief fundraiser, and Ruth Turner, director of government relations, discussed how to “handle” the cash-for-honours inquiry.

Powell’s name is one of up to five that appears in the police file being considered by the Crown Prosecution Service (CPS).

The disclosure that the SFO tried secretly to access the confidential Downing Street computer system will infuriate No 10, which is bracing itself for the CPS decision on whether anyone will be charged. It is expected in the next few weeks.

A Downing Street spokesman said yesterday: “Jonathan Powell was not involved in the decision not to prosecute, which was handled by civil servants. He did not discuss the case with his brother. The fact that they are brothers is therefore totally irrelevant.”

Scotland Yard and the MoD said they could not comment.

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