John Rentoul: There's no email that says 'Kerching!' Not edifying, then, but not illegal

The Prime Minister was not interviewed under caution

First things first. It was wrong of Tony Blair to try to keep secret the fact that four of the people he nominated to the House of Lords had lent Labour large sums of money. Before we get to the "but", a warning to those of a Blair-hating disposition. An American reader once complained because she paid $2 to read an article on the internet on the basis of a first paragraph in which I was mildly critical of Blair and felt cheated when I went on to argue that he was not, in fact, a war criminal. You know who you are, madam. Do not read on.

What the Prime Minister did was reprehensible, but it was not illegal. The important development in the cash-for-honours case last week was that the police finally acknowledged that Blair had not broken the law. The Prime Minister was not interviewed under caution. This means that they have decided not to recommend to the Crown Prosecution Service that Blair be charged. Strangely, though, the headlines were not "PM to escape charges".

No. Almost all of the reporting, including by the BBC, presupposed that he was guilty, and that if he were to avoid being charged this would be only by spin or by shifting the blame to others. Kirsty Wark on Newsnight was in such transports of excitement that I thought she might expire on live television. "Political historians will look back on this day as one of the most extraordinary of Tony Blair's tenure." "Bombshell." "This has been an incredible day." Unfortunately, Anthony Howard, brought in to lend the gravitas of the "long view", went off script to observe that, "in the long view, it is not absolutely 'shock, horror' that people who give money to political parties tend to get honours".

Thus, after nine months of a police investigation that must have cost the taxpayer much more than £1m, we are back to roughly where we started.

It was in March that Angus MacNeil, the Scottish National Party MP, wrote to the Metropolitan Police commissioner to say: "Dear Sir Ian, I am writing to you regarding the growing circumstantial evidence surrounding the alleged selling of peerages." Sir Ian Blair should have asked a junior member of staff to draft a suitably polite reply. "Grateful", "take any allegation of a criminal offence seriously", "urge anyone who has evidence of wrongdoing to come forward". Because MacNeil certainly had none. The "damning evidence" cited in his letter was what MacNeil described as "The Sunday Times dossier". He cut and pasted the newspaper's conclusion into his letter: that 80p in every £1 donated to Labour by individuals comes from people who have been honoured.

That is not even circumstantial evidence. It is an exercise - as Howard rightly observed - in probability. Yet it was on this thin basis that Sir Ian decided to launch an investigation. Who knows why? Perhaps, in an atmosphere where most journalists take it as given that the Prime Minister is a liar, it would have taken a more courageous man than Sir Ian to refuse to investigate, however flimsy the case. The commissioner was already fighting for his professional life against a press justifiably incensed by his handling of the shooting of Jean Charles de Menezes.

Once launched, however, the investigation was bound to acquire a life of its own. John Yates, the assistant commissioner in charge, started by rereading The Sunday Times. Des Smith, an Essex head teacher and government adviser, had told a reporter pretending to work for a rich benefactor that a peerage was a "certainty - well, almost" if he put £10m into city academies. Smith was arrested, despite his willingness to be interviewed, and, after 10 hours of questioning, the police seem to have worked out what should have been obvious: that he was making a cynical observation rather than a promise. The city academies line of inquiry was dropped.

So the investigation was widened beyond the Honours (Prevention of Abuses) Act 1925, which bans payment for "endeavouring to procure the grant of a dignity or title of honour". That was the Act cited by MacNeil, but now Yates began to look at whether the secret loans broke the Political Parties, Elections and Referendums Act 2000. That at least had the advantage of appearing to be even-handed, because it was the Conservative Party that first started to exploit the fact that loans made on commercial terms do not have to be declared. Again, morally doubtful as the device was, it would be hard to prove that it was unlawful, because the Act does not define "commercial terms".

We are left, then, with leaks suggesting that the police think they have evidence that Lord Levy, Blair's fundraiser, asked Christopher Evans, a biotech entrepreneur, if he would like a knighthood or a peerage five years ago, long before he lent Labour £1m. Evans was knighted in 2001, but not nominated for a peerage, so any connection between the money and honours is going to be hard to prove. One Downing Street official to whom I spoke a few weeks ago was confident that "there is no email that says, 'Kerching!'". Not edifying, then, but not illegal.

No wonder, therefore, that BBC journalists would rather interview each other about the timing of Blair's date with the detectives on the same day as the publication of another waste of public money. Lord Stevens's report on the death of Diana, Princess of Wales, spent £3.5m to tell us what we knew already, that she died in a car accident because she was not wearing a seat belt. With a herd mentality and a genius for misquotation, the media was unanimous that Blair had decided that this was "a good day to bury bad news". (What Jo Moore, Stephen Byers's special adviser, actually wrote on 11 September 2001 was: "It is now a very good day to get out anything we want to bury.")

The conclusion of the Yates inquiry is likely to be similar to that of Lord Stevens's, in that it will tell us what we knew already. Blair tried to get round the safeguards he had himself put in to clean up politics, and took an extraordinary risk in so doing. When my colleague Marie Woolf performed a service to democracy by exposing his attempted elevation to the peerage of the four secret lenders last year, his reputation crumbled. Even without the police investigation to dramatise it (and the glee with which it was repeated that Blair was the "first serving prime minister" to be interviewed by police certainly made it sound dramatic), he had poisoned his final few months. He had promised to be different, but in the end his defence was that the other lot did it and the party needed the money.

That ought to be damning enough. But no, the state of our public debate has become so overwrought that it is not possible simply to disapprove of something. If people really, really disapprove - of Blair's decision to join the invasion of Iraq or to try to give seats in Parliament to party funders - they describe it as "criminal" and try to find a law that has been broken. That is fine as rhetoric, but something has gone awry when it diverts police resources from catching people who really are criminals.