Lord Levy arrested in cash-for-honours probe

Lord Levy, the Labour party's chief fundraiser, has been arrested for a second time in the cash-for-honours investigation.

The peer, who is the Prime Minister's envoy to the Middle East, was first arrested last July. However, this time he was arrested on suspicion of conspiracy to pervert the course of justice.

He was not charged and he was later released on bail. A spokesman released a statement on behalf of Lord Levy, which said that he denied any allegations of wrongdoing.

Lord Levy's arrest follows the arrest of another senior aide to Tony Blair, Ruth Turner.

The arrests have prompted speculation of a government cover-up over the affair. Last week Downing Street denied claims that there was a hidden e-mail system from which e-mails had been deleted since the inquiry began.

On Wednesday, Mr Blair refused to answer questions about the investigation at Prime Minister's questions, saying that he was unable to do because of the on-going police investigation.

However, Scottish National Party leader Alex Salmond pressed the Prime Minister, asking outright if there was a Downing Street cover-up over the affair.

The cash-for-honours investigation was sparked last year by complaints from SNP MP Angus MacNeil and Plaid Cymru parliamentary leader Elfyn Llwyd, who claimed that peerages were being awarded to those who made large donations or loans to the Labour party. It then emerged that a number of secret loans had been made to the party before the 2005 general election and that some of those responsible had later been nominated for peerages.

The investigation was later widened to cover the other main political parties.

A number of people have been questioned in the course of the investigation, including Mr Blair and former Conservative leader Michael Howard. However, no one has been charged and all those involved deny any wrongdoing.

Liberal Democrat chief of staff Ed Davey said that the affair had "the whiff of Watergate" about it. He said: "For Nixon, the crime was the cover up, but we must await the result of the police investigation to see whether something similar is now happening in Downing Street.

"A key question is whether this can be sorted out before the Prime Minister leaves Number 10 or whether this saga will dog him into his retirement. He must now ensure that we get reform of party funding and the House of Lords at the earliest possible opportunity."

(KMcA)