SITTING in a glass-fronted office in the headquarters of his health company last week, a visibly upset Dr Chai Patel finally decided to “break ranks”.

He was ready to talk about his nomination for a seat in the House of Lords — and the money he gave to the Labour party, which proposed him.

“I’ve broken the dam,” he said. “I’ve got nothing to hide.”

Until this weekend, the only information in the public domain about Patel’s links with the party was that he had made two donations of “more than £5,000”. In the interview with The Sunday Times he disclosed that he had given £100,000 to Labour and loaned the party £1.5m just weeks before he was nominated for a peerage.

His revelations will spark a new row over allegations that Labour has effectively traded honours for cash. Patel, 51, who would traditionally observe the protocol of silence of nominated peers, has spoken out because he believes transparency is now essential for a system that is so badly flawed.

He says he has been subjected to a campaign of innuendo and suspicion. He has been investigated by the Appointments Commission, which vets nominations for peerages, without the chance to hear any allegations against his character or to speak in his defence.

He has not even been told the verdict but the commission, which considers “propriety of character”, has apparently concluded that he is unsuitable to sit in the Lords.

“If this had been confidential and someone had phoned me up and said ‘sorry you are not being put forward’, I would have accepted the verdict and moved on,” he said.

“Instead, people speculate why you have been nominated and then why you have been blocked. I have never been called for an investigation, but I read all sorts of things about the fact I am being scrutinised.

“This is supposed to be a secret process. It’s not meant to be open. But it’s an open secret and everyone can talk about it, except me. I am expected to stay silent and wait patiently.”

Patel believes that the vetting process should be open, with a right of reply, or strictly confidential. He is particularly aggrieved that his work in trying to raise healthcare standards has been ignored in the furore.

He now wishes he had disclosed all his financial links with Labour when it first emerged that he had been nominated. But he was under no obligation to reveal the loan and has broken no rules.

There will be suspicion that Patel loaned the party £1.5m last summer in the hope of an honour, but he vehemently denies this: “Absolutely not. If they had said ‘you will get this, by signing this’ I would have walked out of the room.”

Patel says that when he was approached about the loan he did not know there was the possibility of receiving a peerage. He was called a few weeks after agreeing the deal to say that he had been nominated.

Patel seems to have the right credentials to be a Labour peer. His background is, in his own words, the “classic Asian story”. His father was a shopkeeper and Patel spent part of his childhood living on a council estate in southwest London.

He worked for the National Health Service as a young doctor but became exasperated at the state of care for the elderly. He decided private finances might be one of the best ways of improving public health. He is now chief executive of the Priory group, a mental health and education services company, which includes the treatment clinic used by celebrities.

In 1998-99 he was a member of the government’s advisory group on better standards for residential and nursing home care. He was a trustee of Help the Aged from 2000-02.

One objection to Patel becoming a peer has been allegations of poor care at one of his company’s homes. Claire Rayner, president of the Patients’ Association, said last week that it would be “morally wrong” if he was made a peer.

Patel said the General Medical Council had dropped its action against him over standards at the home after a High Court judge described the charges as a “rotten indictment”. Although he admits there were failures in care, he said he responded rapidly to the complaints and was sorry for the distress caused.

Despite recent events he says that he does not regret supporting Labour but believes it should not exclude him from the Lords: “It doesn’t matter how much you give to a party; you still may have a contribution to make to public life.”

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