A NEW CABINET minister has become embroiled in the cash for honours scandal. David Miliband, often touted as a “next generation” successor to Tony Blair, was named in covert tape recordings by a former government adviser arrested last week.

The adviser recommended that a businessman should target Miliband if he wanted to secure a knighthood in return for sponsoring a city academy.

Des Smith, who is also a London headmaster, told an undercover reporter posing as the businessman’s adviser that he would line up Miliband, a former schools minister, to ask for his backing for an honour.

“I’ll introduce him [the businessman] to David Miliband and say, ‘Knighthood? This is the man’,” said Smith in a meeting with the reporter.

He added that he would recommend to the businessman: “Let’s go for Miliband.”

The minister’s relationship with Smith will be of interest to police officers investigating allegations that honours were offered in exchange for the funding of city academies. The inquiry is already probing secret loans made to Labour by businessmen who were also nominated for peerages.

In another previously unreported recording, Smith talked of “some of the people we deal with” who have sought to sponsor academies: “I say . . . ‘Do we need these people’? . . . ‘Do we need their money?’ . . . Because what they’re looking for (is a) knighthood or some kind of preference. They think, ‘I’ll get an OBE or a CBE’.”

Last Thursday Smith, a former member of the trust that raises millions for academies from the business community, was arrested at his home in east London. He was held at a police station before being bailed pending further inquiries.

The police investigation into the academies follows a Sunday Times exposé earlier this year. It represents a blow to Blair, who has placed the academies at the heart of his education reforms. Unions are already calling for the abandonment of the £5 billion scheme.

The police have already raided the Cabinet Office looking for documents related to the awarding of honours.

It was reported last night that Blair may be questioned by police as a “significant witness”, possibly next month. A spokesman said Downing Street had received no request for an interview with or statement from Blair, but if any were made, “we will co-operate fully”.

In the Sunday Times investigation, Smith described to an undercover reporter what appeared to be a tariff system in which a private sponsor who backed “one or two” academies might receive an OBE or a knighthood while a donor who supported five of them would be “a certainty” for a peerage.

Smith resigned from the trust in the wake of the exposé. His subsequent arrest under the Honours (Prevention of Abuses) Act 1925, could yield “bigger fish” as new plea bargaining rules allow the offer of leniency if a person agrees to provide evidence against others.

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