Cash-for-honours inquiry focuses on role of Blair's chief of staff

Police investigating the cash-for-honours affair have identified the Prime Minister's chief of staff, Jonathan Powell, as a key figure in their inquiries.

The role he played in the selection of Labour candidates for honours is central to the evidence assembled by detectives after a 13-month investigation. The 216-page police report passed to prosecutors last week features dozens of documents that passed the Downing Street desk of the Prime Minister's closest and most trusted aide.

Sources close to the inquiry say that Lord Levy, the Prime Minister's chief fundraiser, Ruth Turner, Mr Blair's director of government relations, and Mr Powell feature heavily in the assembled evidence, along with Sir Christopher Evans, a biotechnology tycoon and Labour Party donor. The police have looked closely at whether Mr Powell was involved in an alleged cover-up of the scandal, which led to Ms Turner being arrested on suspicion of attempting to pervert the course of justice. He has been interviewed by the police.

Police are also focusing on Lord Levy's role in the selection of Labour supporters for honours, as well as in an alleged attempt to mislead police. Friends of the Labour peer have expressed confidence that he will not be charged.

Lord Levy, who is currently on police bail following his arrest, will come under fresh scrutiny this week when opposition politicians will ask about his relationship with Lord Goldsmith, the Attorney General.

A spokesman for Lord Levy said he did not know whether he had met Lord Goldsmith since the emergence of the cash-for-honours scandal. But Lord Oakeshott of Seagrove Bay, a Liberal Democrat Treasury spokes-man, believes that Lord Goldsmith's role as a Labour minister links him to Lord Levy both professionally and socially.

"I will be asking on how many occasions has Lord Goldsmith met Lord Levy since May 2005, what contact he has had with him at social occasions and at official occasions," said Lord Oakeshott. He added: "There is no reason why the Attorney General should be involved in the decision to prosecute."

Lord Goldsmith, who has oversight of the Crown Prosecution Service as well as being a government figure, is expected to play a key role in the decision about whether to take the case to court. The Attorney General, who ruled that military action against Iraq would not breach international law, has insisted that he will be consulted about whether there is a case for prosecution and will decide whether to go to court after consulting an independent barrister.

But politicians believe that Lord Goldsmith should step aside from any decision because of a potential conflict of interest and his friendship with the Prime Minister.

The Attorney General's staff have already been in regular contact with the CPS over the timing of the case. Lord Goldsmith is expected to ask to see the CPS's conclusions and even its file of evidence, which includes around 6,300 documents.

A spokesman for the Attorney General said it was normal for the CPS to consult him "in serious and sensitive cases": "The CPS comes at an appropriate stage to consult him and a dialogue follows. [The case] is at a very early stage and we are not at the stage yet where the Attorney General will be consulted."

The CPS's top lawyer, Carmen Dowd, will take advice from the barrister David Perry QC on whether to prosecute before she makes the final decision.

A spokesman for the CPS said: "We are in contact with the Attorney General's office every day. The Attorney General is entitled to see whatever he would like to see."

The CPS case may not be concluded until after Tony Blair leaves office, when Gordon Brown is expected to take over.

Key players in loans affair

LORD LEVY

The PM's chief fundraiser is currently on police bail after being arrested on suspicion of conspiracy to pervert the course of justice. He was the key link man between No 10 and millionaire donors later nominated for honours and is believed to have been consulted on which Labour donors should be considered for peerages.

RUTH TURNER

Tony Blair's director of government relations was arrested on suspicion of perverting the course of justice. Relied on by the PM, she is considered hard-working and straightforward. She helped draw up the names for the honours list. Suspected of not being helpful with police inquiries.

JONATHAN POWELL

The PM's chief of staff is his most trusted aide. He has been interviewed by the police but has never been arrested. Mr Powell will have played a role in drawing up the honours list and in negotiations with the police over the interview of Tony Blair. Thought to have been asked questions about an alleged cover-up.

SIR CHRISTOPHER EVANS

Sir Christopher Evans, a biotech millionaire, is the only Labour donor to have been arrested. A memo in his diary before he obtained a knighthood referred to a conversation with Lord Levy about honours. It referred to talk of "a K [knighthood] or a big P [peerage]?". Now on police bail, he expressed shock at his arrest.