Tony Blair today became the first serving Prime Minister to be questioned as part of a criminal investigation when he was quizzed at No 10 about the cash-for-honours scandal.

Critics said that the development was a huge embarrassment for Mr Blair, who came to power in 1997 promising to be "whiter than white".

The Prime Minister's official spokesman said that Scotland Yard detectives arrived at No 10 shortly after 11am. They are thought to have left about two hours later.

The move follows months of speculation over whether and when Mr Blair would receive a knock on the door from the team led by acting Deputy Assistant Commissioner John Yates. However, it is not thought that Mr Yates - who would have been immediately recognised by journalists - conducted the interview.

The No 10 spokesman said that the Prime Minister was questioned as a witness and had not been arrested or cautioned. He had a civil service notetaker with him but no lawyer.

He denied that it had been deliberately timed to coincide with the release of a long-awaited report into the death of Diana, Princess of Wales, which is guaranteed to take up a lot of space on tomorrow's front pages.

"Categorically that was not a factor at all. Categorically there was no linkage to other events," he said.

"Given that the SNP (Scottish National Party) made the complaint about people nominated for peerages by the Prime Minister you would expect that the police would ask to see the PM as their inquiries come to a conclusion," the spokesman added.

Mr Blair’s spokesman said: "The Prime Minister explained why he nominated each of the individuals and he did so as party leader in respect of the peerages reserved for party supporters as other party leaders do.

"The honours were not, therefore, for public service but expressly party peerages given for party service. In these circumstances that fact that they had supported the party financially could not conceivably be a barrier to their nomination."

Angus MacNeil, the Scottish Nationalist Party MP who triggered the police investigation, said: "This revelation will be shaking the very foundations of Westminster. For the Prime Minister to be questioned by the police during a criminal investigation is unprecedented."

The Scotland Yard cash-for-honours inquiry was announced in March to investigate a series of loans made to both main political parties by millionaire backers in the run-up to last year’s general election.

It was sparked by claims that wealthy Labour backers were being rewarded with peerages and was later widened to cover similar claims about the Conservatives.

Labour secretly borrowed £14 million to fill its campaign war chest and the Tories £16 million - allowing both to get round rules on declaring donations.

The controversy extended beyond questions of party funding when it emerged that some of the wealthy backers behind the loans were subsequently nominated for membership of the House of Lords.

Both parties deny claims that financial support was being rewarded with honours in contravention of a 1925 anti-corruption law.

Police are also investigating possible breaches of the Political Parties, Elections and Referendums Act 2000.

Earlier this year Mr Blair's friend and ally, Lord Levy, Labour's biggest donor, was arrested in connection with the inquiry. He was later re-interviewed and re-bailed without charges and insists that he is innocent.

Mr Yates is expected to deliver his final report to the Crown Prosecution Service in January.

Scotland Yard said they were not planning to make any statement on the interview. A Conservative Party spokesman also refused to comment.

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