Earlier this year the prime minister walked through the glass atrium of Portcullis House, the modern wing of parliament, to face a deeply unwelcome grilling from his own party executive.

In a committee room were waiting 31 members of Labour’s national executive committee (NEC), including MPs, trade unionists and activists. They were shocked and angry after learning from reports in this newspaper how Blair had funded the party’s 2005 election campaign with secret loans from businessmen, some of whom had later been proposed for peerages.

They wanted explanations. Why had Blair agreed to the loans, which ran into millions? Why had he told party chiefs nothing about them? Why did some donors claim the party, not the lenders, had proposed the arrangements? Until now, what Blair told the NEC has never emerged. But this weekend a record of the meeting on March 21, obtained by The Sunday Times, gives the first insight into Blair’s motivation — that he wanted to keep the identity of party “donors” secret.

The admission is potentially damaging. There is nothing illegal in parties taking properly commercial loans and not declaring them; but using loans to disguise what are in effect donations would be another matter altogether. The record of the meeting, and other new evidence suggest that this may indeed have been the reason why Blair agreed the loans.

An account of the NEC meeting written for Labour’s archives states: “Tony Blair said that he understood members’ concerns, and took full responsibility for everything done in the name of the party. . . Anyone giving to Labour was trashed in the media and so potential donors preferred the confidentiality of a loan.”

That record may now come back to haunt the prime minister. Later on the day of the meeting, the police announced they would be launching an investigation into the “cash for peerages” affair.

Two obvious lines of inquiry presented themselves. The first was to examine whether honours had been dispensed to party backers in return for funding. Four of Labour’s lenders were later nominated for peerages; a law dating from 1925 prohibits the sale or procurement of honours.

The second line of inquiry was to examine whether political parties had broken the law by failing to declare the identities of financial backers. Measures introduced by Blair in 2000 state that donations worth more than £5,000 must be declared and the donors identified. Only money lent on strictly commercial terms need not be declared.

This weekend further new evidence suggests that Labour might have deliberately turned potential donations into loans to keep its backers secret.

The Sunday Times has learnt that one of those put forward for a peerage, Dr Chai Patel, has told police that he originally offered Labour a donation but was asked to make a loan instead.

He said that in an initial meeting he agreed to donate £1.5m. He was then telephoned a “few days later” and told the party would prefer the money as a loan. Another of the lenders, Sir Gulam Noon, makes similar claims.

Noon lent the Labour party £250,000. “My position is that I was very happy to contribute as a donation but that I was asked to give a loan,” he has said.

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