Labour adviser 'reminded' donor to conceal loan

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The hunt was on last night for a "senior Labour official" who advised a leading Labour Party donor to conceal the fact that he had lent the party £250,000.

Sir Gulam Noon, who was nominated for an honour after lending Labour £250,000, was "reminded" by a senior Labour Party official that he did not have to declare the loan on his nomination form for a peerage.

The businessman dropped a reference to the loan in official papers he submitted to Downing Street after he was told by the official that it was not necessary to declare it.

The revelation that a senior Labour official interfered in the honours process raises fresh suspicions that the Labour Party was trying to conceal evidence of the loans from the body that vets House of Lords peerages.

Sir Gulam was nominated for a Labour peerage by the Prime Minister, Tony Blair, but his nomination was blocked by the House of Lords Appointments Commission, the independent body which vets peerages, after his cash links to Labour emerged.

On the first form filled out last October and submitted to Downing Street, Sir Gulam provided details of the loan, along with donations to Labour, after consulting his accountant. But a day later he sent in a new form to Richard Roscoe, head of nominations at Downing Street, without reference to the loan.

"He was reminded that it was not necessary to put it on the form by a senior official," a close friend of Sir Gulam told The Independent on Sunday.

The commission, which vets peerages, was not told about the donation. Failure to disclose the loan is understood to have been a key factor in the watchdog's decision to block his nomination to the House of Lords.

This week, an all-party committee of MPs will pile pressure on Downing Street over its decision to nominate generous financial backers. The Public Administration Select Committee will express serious concerns about the award of peerages to party donors and supporters of city academies. It is expected to stop short of saying that party donors should be banned from receiving peerages, but will raise doubts about the award of honours to financial backers who would otherwise be unlikely to qualify.

The committee will meet police investigators looking into the affair over the coming week.