Jack Straw said that despite the millions of pounds the Harrods owner had paid in taxes and charitable donations since moving to Britain, he did not pass the "good character" test to enable him to become a naturalised British citizen.
The reasons behind last week's decision to reject MrFayed's bid for a UK passport were disclosed yesterday after the tycoon published a letter he had received from the Home Office explaining Mr Straw's position.
The three-page letter said the Home Secretary had given "considerable weight" to MrFayed's substantial charity work, his support of the country's "commercial interests", the fact that he had paid substantial taxes to the Treasury, and his family circumstances. But it also highlighted the controversies surrounding the opening of a Harrods safety deposit box that belonged to Mr Fayed's business rival, the late Tiny Rowland, and Mr Fayed's admitted involvement in paying MPs to ask questions in the House of Commons.
The letter, from Ailish King-Fishe of the Home Office, said Mr Straw believed Mr Fayed's failure to intervene promptly after his staff broke into Mr Rowland's box constituted more than a "minor blemish" on his character - as Mr Fayed had argued - but demonstrated a "serious want of probity".
Mr Straw also dismissed Mr Fayed's claims that he did not realise that making secret payments to MPs was improper and unethical. The Home Office letter, to Mr Fayed's solicitors, stated that the Home Secretary "believes several factors indicate your client knew the payments were improper".