Schmoozes, hints, nudges and winks. But no proof: Labour lender tells of being 'flattered' by party officials

It was 3am in the northern Indian town of Bhawanimandi, when Sir Gulam Noon's mobile phone rang. The ready meals millionaire rose from his bed, wondering who could be calling him so early on Friday morning. To his surprise it was the BBC with the news that the cash for honours police inquiry had been concluded and would lead to no charges at all. The tycoon was extremely surprised, and more than a little relieved.

For nearly two years, Sir Gulam had been embroiled in the biggest political controversy of the Blair years. He was one of several wealthy Labour supporters at the centre of cash-for-honours inquiry after being nominated for a peerage by the then Prime Minister.

The controversy over the honours escalated into a full-scale police investigation after it emerged that in addition to millions of pounds of donations, millions of pounds in secret loans had been hidden by the Labour Party. After a complaint to the police by a Scottish Nationalist MP, the inquiry dogged the final 15 months of Tony Blair's premiership.

Sir Gulam was interviewed by several detectives, under caution, along with other Labour donors who had never imagined their act of generosity would lead to a knock on the door from Scotland Yard. On his way to Delhi, he told The Independent on Sunday how relieved he was that the investigation was finally over, but he said the motivation for the inquiry had been "political".

"It's a relief for everybody. I am relieved for myself because there is no charge. It was political more than anything else and people like me come into the picture for nothing – no fault of theirs," he said.

He was not the only donor caught up in the controversy for whom Friday's CPS announcement came as an enormous relief.

Dr Chai Patel, founder of the Priory clinics who lent £1.5 million to Labour, said that the sense of liberation was so profound that it was similar to being cleared of a terminal illness. He said the cash for honours affair had gone to "the heart" of his character and his reputation.

"Even when you know that something is not wrong with you, if you are being investigated until somebody finally comes back and says you haven't got cancer, until that day at the back of your mind you always worry. If there is an investigation into anything even if you are very sure in yourself there is apprehension really," he said.

Both men hired expensive legal teams to defend them. However, unlike other political figures, who wasted no time in criticising Scotland Yard for pursuing the inquiry, neither man had harsh words for the police.

"Everybody did their job. The police did their inquiry. The Crown Prosecution Service did their bit and eventually it has come to this. The police were very courteous to me they behaved in a most professional manner," Sir Gulam said.

Dr Patel said he found the police who interviewed him once "very cordial and very professional". "For me I have no issue with the process and its length because obviously this is a serious matter," he said.

But his concern was that the cash-for-honours inquiry had reaffirmed people's belief that honours were linked to cash gifts to political parties. That belief has persisted for decades after Lloyd George's brazen selling of peerages prompted the outlawing of the practice in 1925. It was the 1925 Act that was cited against Blair and his inner circle.

"You are basically feeding people's impressions of what they think historically happened must be going on now," he said.

Sir Christopher Evans, the biotechnology millionaire, was one of four people arrested by the police after his name was found by Scotland Yard on an early draft of people who could be put forward for peerages. His involvement was prompted by a member of the Serious Fraud Office who gave a witness statement to the Metropolitan Police claiming that Sir Christopher's lawyer had told him he was expecting a peerage. Sir Christopher insisted that the claim was not only completely untrue but "malicious". He told The Independent on Sunday he was not only surprised but "very cross" to have been arrested.

"Who wouldn't be? It was not something you wanted reputationally to take place. I had a lot of things on my CV but not an arrest and I have got one of them now," he said.

The businessman explained how he had often been schmoozed by Labour politicians, who were dazzled by his wealth and success in science and business. On several occasions he has shared platforms with Gordon Brown and Tony Blair. During parties and dinners hosted by the Labour Party it was not unusual for Sir Christopher to be told he belonged in the House of Lords, or even on the government benches as a science or business minister.

"You would have a lot of schmoozing and people would say it would be great if you did x. Or wouldn't it be wonderful if you were in the House doing this or if you were this particular minister or that. Some of that is lighthearted and some is meant seriously and some is suggestibility and, yes, you can be flattered. It was usually science – anything to use my scientific or business skills."

Sir Christopher said he had had a "gutful" over the past 16 months, but could not fault the police who he said were "very nice chaps".

"I have got to be honest, the police before, during and afterwards have treated me very courteously and professionally with the utmost respect, so I really cannot level any criticism to the way they handled me and treated me," he said.

Sir Christopher's wrath was reserved for the Labour Party and Blair machine which he said left him "dangling" as he faced the firestorm of the police inquiry and world's media.

"It wouldn't have done any harm to have a little bit more muscular support coming out from either the Labour Party or the Government," he said.

Not everybody involved in the police inquiry was so understanding about the role of the police. Even before the official decision to drop the case had been announced, Tony Wright, chairman of the Commons public administration committee, said the police investigation had been damaging to British political life. His committee is now planning a parliamentary inquiry into the affair.

Former aides of Mr Blair also attacked the police for their conduct. Benjamin Wegg-Prosser, a former senior adviser at No 10, rounded on Scotland Yard for their "disgraceful treatment" of some Blair advisers. Most thought he was referring to the arrest of Ruth Turner, then Mr Blair's gatekeeper, at 10 past six in the morning.

The police are now bracing themselves to see if the key figures in the inquiry will sue them for wrongful arrest, or whether an official complaint will be lodged with the Independent Police Complaints Commission.

Last night Lord Levy was relaxing at home in London and making the final preparations for his son's wedding in a week. The ebullient peer was relieved to be out of the media spotlight. He had not yet turned his thoughts to whether to pursue the police for wrongfully arresting him. There is talk of a complaint to the Independent Police Complaints Commission. Lord Levy said he was "disappointed by the constant leaks to the media, which have been misleading, factually inaccurate and personally damaging to me".

Like Ruth Turner, Lord Levy's genetic imprint is now on the DNA database alongside rapists and murderers. Would he ask to have the DNA removed?

"He is happy that it is over," said one Labour source. "At the moment it's done with its behind him and he is glad to have got through it. Anything else is for a clearer date and a later date."

Even before the CPS announcement was made, the police were telling each other privately that they were in a "no-win situation." Although they knew that members of the small, close-knit inquiry team had not leaked, they said someone not linked to the inquiry was talking, giving the impression that the Met was leaking like a sieve.

"They will either think it is a whitewash if there are no charges, and a waste of money, or they will blame us if there are," said one Scotland Yard officer. "Luckily Yates is preparing to take the heat on this."

Within an hour of the CPS confirming that no charges would be brought, the Assistant Commissioner of the Metropolitan Police did indeed face down his critics. Looking nervous, and speaking haltingly, Yates of the Yard firmly defended his officers, and the decision to "follow the evidence".

"With allegations such as these, which were of utmost seriousness, the investigation had to be thorough and meticulous in every respect," he said.

Sixteen months of police time, and a million pounds of taxpayers' money had been spent gathering the evidence that, in the end, had come to nothing. Although the police believed they had gathered enough circumstantial evidence that loans had been linked to cash to secure a conviction, the CPS and the lawyers advising them came to the conclusion that the proof was not overwhelming enough to ensure that the case could stand up in court. In the glare of the media spotlight, they wanted to avoid the prospect of millions of pounds more of taxpayers' money being spent on a trial – including legal aid for the defendants – only to see it collapse in an ignominious heap in court.

The Crown Prosecution Service spent months poring through the 200-page police file, supported by 6,000 documents. Although initially excited by the evidence, they soon began to develop suspicions that it was not as strong as it initially appeared.

The focus of the inquiry was on key figures linked to Downing Street, including Ruth Turner and Jonathan Powell, the Prime Minister's chief of staff. But the evidence that emerged was largely based on the inference that cash donations had helped to secure honours – which in itself was not sufficient to gain a conviction in court.

Carmen Dowd, the lawyer in charge of the investigation, and David Perry, the QC consulted on the issue, came to the same conclusion, as did Chris Newell, the CPS's principal legal adviser.

Their conclusions surprised some police officers, who had been talking to the CPS throughout and were even sent away to gather further evidence, and re-interview Mr Blair.

What the CPS wanted was direct evidence that peerages had been promised in return for cash, or "unambiguous" information that a deal had been done. In a firm statement, they revealed that "there is no direct evidence of any such agreement between any two people subject of this investigation."

The cash-for-honours affair had drained cash from Labour's coffers as donors shied from being associated with a party being investigated by the police. The most recent party accounts show that Labour is still saddled with debts of £24.5m. Will Sir Christopher Evans now come to Labour's rescue? "I like Gordon Brown: he is a nice, genuine guy," said Sir Christopher. "But at the moment I am not exactly rushing out to grab my cheque book."

The accuser: Angus MacNeil MP

Westminster can only be described as half a democracy: the Lords chamber is appointed. The correlation between large financial donations and some Lords appointments would only seem coincidental to the extremely naive or the willingly naive. Large donors to Labour were thousands of times more likely to get a peerage than non-donors over the last six years and 80p in every £1 of donations came from people who were knighted or ennobled. The last 16 months of investigation has changed that utterly. All decent MPs will welcome that.

There is now a cleansing of the "nod and wink corruption" of our democracy and for that, alone we should be thankful to John Yates. But Parliament should go further, for as long as the undemocratic element remains at Westminster, there should be a "quarantine" period of six to seven years between donations and honours. This would still allow people to donate but would effectively break the link with honours while not disqualifying people for life.

Some have asked whether the police should have been involved. I give a 100 per cent yes. It has given Westminster a jolt to move into the 20th century. Others say that this has gone on for years and a blind eye should have been turned. Street muggings have gone on for centuries and no one would suggest that they should be ignored, even though the offenders are seldom caught. The mugging of democracy should be seen in the same light.

The CPS did not think there was enough evidence to ensure a reasonable chance of prosecution and felt "that there were proper reasons for the inclusion of all those whose names appeared on the 2005 working peers list, or drafts of that list: that each was a credible candidate for a peerage." The Lords Appointment Committee appeared not to agree 18 months ago.

The Westminster establishment has had a close warning shot across the bows. The sensible action would be to alter course so that this never need happen again.

The accused: Sir Christopher Evans

I was very cross when I was arrested. Who wouldn't be? I had a lot of things on my CV, but not an arrest. I have now.

I had never made any secret that I had given a loan or any donations to the Labour Party, but when it came out it sounded as if it was a big mystery loan. When they homed in on Michael Levy and me, we were left dangling.

We knew we had nothing to hide and I knew we would be successful in the end. I have legal counsel and I can look after myself. But it wouldn't have done any harm to have a little bit more muscular support coming from the Labour Party or the Government. Only they really know the ins and outs of it all.

Tony Blair would admit himself that it was a very unfortunate affair and that it did damage him. In his latter days, there was so much talk and shadows cast about this affair. It did reflect badly.

I like Gordon Brown. He is a nice, genuine guy, but I am not exactly rushing out to grab my cheque book. I need a bit of a break. I am still a Labour Party supporter and if I can be of help on matters scientific and business and enterprise, I am sure they will call me if they need me. But there are other things I need to do with my business and family before I start writing cheques.

There was a lot of schmoozing going on for the past 10 years. That has always gone on in all political parties, and that will always happen because governments need people. So people would say, "It would be great if you did x, or wouldn't it be wonderful if you were in the House doing this, or you would make it really good if you were this particular minister or that." Some of that is light-hearted and some is meant seriously and, yes, you can be flattered. I used to think about what it would be like getting into politics. There are people who want to be in the House of Lords or the Government wants in the House of Lords. Maybe in years to come someone will ask me, "You could make a contribution – do you fancy doing it?" I don't know.

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