Police investigating the cash-for-honours affair are to be advised to take Labour to court for breaches of electoral law, The Independent on Sunday can reveal.
The official elections watchdog, which is advising Scotland Yard investigators, is preparing to say that Labour has "a case to answer" and should face charges.
The case against Labour under the Political Parties, Elections and Referendums Act (PPERA) is now being prepared by the police. They are also gathering evidence for possible conspiracy charges.
The Electoral Commission, which is to give its opinion on the PPERA as the official regulator, is understood to believe that Labour should be tried because it is unclear that loans it accepted from millionaire backers were made on normal commercial terms.
Sources have told the IoS that the Electoral Commission believes that the question is whether Labour failed to disclose the "benefit" of loans which were not made on fully commercial terms. "It is not clear that they were commercial. This is something that needs to be tested in court," one source said.
The advice will come as a blow to Tony Blair who, as leader of the Labour Party, could be forced to give evidence in court as a witness, if not as a defendant.
One cabinet minister said it would be "a disaster" if Mr Blair were cross-examined in court, adding that he could be asked anything by lawyers under oath.
Angus MacNeil, the Scottish Nationalist MP who first called for a police investigation, said that the Crown Prosecution Service, which will decide on whether to go to trial, would have to take the watchdog's advice very seriously.
"This is a serious body and this ratchets the while thing on to another dimension altogether," he said. " I can see Downing Street lurching from storm to storm over the next few months."
The police are also pursuing possible "conspiracy" charges amid allegations that Downing Street has not co-operated fully with the police and may have withheld crucial email evidence.
One senior Whitehall source said that while No 10 had not obstructed the inquiry, it had not gone out of its way to help police or direct them to material they might want. "They have not been overtly helpful. They only give them what they ask for," he said.
Six plainclothes police have spent days in Downing Street downloading computer files, including deleted emails held in a special computer archive, which backs up all No 10 files. They also looked at email accounts used for confidential internal Whitehall emails.
In recent weeks, Jonathan Powell, the Prime Minister's chief of staff, is believed to have been interviewed again by the police - it is thought under caution - along with John McTernan, a Downing Street aide who helped to draw up names for honours.
The Electoral Commission confirmed it would be advising the police. It refused to comment on what its advice would be.Reuse content