PM insists no one in his party sold honours

Tony Blair has claimed that no one in the Labour Party has sold honours or peerages, and insisted there is nothing wrong with giving a seat in the House of Lords to someone who has donated money to a political party.

The Prime Minister, who is expected to be questioned by police investigating the "cash for honours" affair, hinted at his line of defence in an interview with BBC1's Politics Show.

Mr Blair did not believe anyone in the Labour Party had broken the rules and spoke up for Lord Levy's role as his personal envoy to the Middle East, saying he had done a "superb job". The peer, also Labour's chief fund-raiser, was arrested last week as part of the police inquiry.

"Nobody in the Labour Party to my knowledge has sold honours or sold peerages," he said. "The fact that is sometimes excluded from the public's mind in relation to this debate is that there are places in the House of Lords that are reserved for party nominees for their party supporters."

Four businessmen who lent a total of £4.5m to Labour - Sir Gulam Noon, Barry Townsley, Sir David Garrard and Dr Chai Patel - were nominated to become working peers last year but were blocked by the Lords Appointments Commission.

Mr Blair said: "These are not honours, they are working peerages reserved for party supporters, Conservative supporters, Labour supporters, Liberal Democrat supporters. In my view, it is absurd to say, that if someone supports a political party financially - helps it pay its bills, run its election campaign - that they should be debarred from being party supporters for those places reserved specifically for party supporters."

He stressed that parties had to raise money, suggesting the problem will have to be met in future by more taxpayers' funding.

The Levy affair seemed to take on international dimensions, as Mr Blair became the butt of a joke by President Vladimir Putin at the G8 summit of the world's most powerful nations in St Petersburg. When Mr Putin was asked by a British journalist about his country's much criticised record on civil rights, he retorted: "There are also other questions, questions let's say about the fight against corruption. We'd be interested in hearing your experience, including how it applies to Lord Levy."

Downing Street downplayed the remark. The Prime Minister's official spokesman claimed: "He has a joke for each and every leader and we haven't lost our sense of humour."

But Mr Blair's critics at home suggested that his status as a world leader had been undermined by sleaze allegations.

Sir John Major, the former Prime Minister, said it served Labour right to be on the receiving end of sleaze allegations after the way it attacked his Tory government in the 1990s, and that what is now alleged is more serious than Tory sleaze ever was. "What goes around comes around and they are now suffering from that themselves," he told the BBC's AM programme.