The prime minister’s fundraiser-in-chief had arrived for his regular grilling by the party committee on donors, a panel designed to prevent undesirables giving money in the hope of winning influence. It had been set up after a row in 2002 when it emerged that Richard Desmond, owner of Express Newspapers and publisher of pornographic magazines, had helped the party.

Levy was a founding member of the committee but had always found the meetings disagreeable, scrutinising as they do the character of every donor who gives £5,000 or more.

In recent months, however, they had become insufferable.Baroness Jay, Levy’s confidante and fellow fundraiser, and other Blairites had moved on, leaving him outnumbered by an old Labour crowd.

The half-dozen in attendance that morning included Peter Watt, new general secretary of the party, and Ian McCartney, the Glaswegian Labour chairman. Levy had toiled for more than a decade to marginalise Labour stalwarts like these by switching the party’s donor base from the TUC to the City.

Levy, immaculately clad in a crisp white shirt, tie and Savile Row suit, was eager to get the meeting over with and started to run through his latest conquests.

One of those mentioned is thought to have been William Bollinger, a multi-millionaire hedge fund manager with a £50m fortune and a spectacular townhouse in Chelsea.

The former Goldman Sachs man might not have been traditional Labour material, but times were tough and Levy had extracted £250,000 from him only a few days before.

As Levy cantered on he was interrupted by one of the old Labour crowd. What precisely was said is not known but Levy — known as "Mr Cashpoint" within the party — blew a fuse.

Visibly riled, he is said to have launched a into a bitter attack on the ingratitude of the party. "I don’t know why I bother raising millions for this party," he is reported as saying. "No one here appreciates what I’m doing."

One cabinet minister who learnt later what had happened said: "There had been concern for a while about the growing rift between Levy and the culture of the Labour party, but this brought it out into the open."That rift has now become very public indeed.

When The Sunday Times revealed last week that three businessmen nominated by the prime minister for peerages had also contributed millions to Labour’s coffers through a secret loan arrangement, the party erupted in virtual civil war.

Tony Blair and Levy, senior party figures alleged, were guilty of "gross hypocrisy" and even "impropriety". "This is a stain on our parliament," said Paul Flynn, a backbench MP.

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