GORDON BROWN and John Prescott will be questioned by detectives investigating the cash-for-peerages allegations, it was reported last night.

The Chancellor and the Deputy Prime Minister, as well as other Cabinet ministers, will be asked whether they knew that the businessmen who secretly lent the party millions of pounds had been put forward for peerages by Tony Blair.

It is understood that the ministers will be questioned as witnesses, rather than suspects.

A source close to the Scotland Yard investigation said: “What the police are seeking to establish is whether Downing Street deliberately concealed details of the peerage nominations from senior members of the Labour Party.” The source told The Daily Telegraph: “The police are trying to prove if there was a conspiracy.”

Last night’s developments came after Lord Goldsmith, QC, the Attorney-General, moved to defuse the controversy over his role in the inquiry by agreeing to appoint senior counsel to advise him over any prosecution.

However, he re-affirmed that he would not stand aside from personal involvement in any decision to prosecute.

Mr Brown, who ran Labour’s election campaign last year, has previously distanced himself from the controversy by publicly denying all knowledge about £14 million of loans to fight the campaign secured by the party from 12 businessmen.

A Treasury spokesman said: “A police investigation is under way. There is no prospect of us getting into a running commentary on it.”

The investigation began in March after a complaint from a Scottish National Party MP over peerage nominations for four businessmen who lent the party money: Sir David Garrard, Barry Townsley, Dr Chai Patel and Sir Gulam Noon. Their peerages were blocked by the House of Lords Appointments Commission.

Labour accepted the loans last year to fight the election campaign, which cost about £18 million. Jack Dromey, the Labour Party treasurer, later complained that the loans had been concealed from him.

Lord Levy, the Prime Minister’s fundraiser, has already been arrested and interviewed twice, and the bio-technology millionaire Sir Christopher Evans, who lent £1 million, and Des Smith, a headteacher who raised money for the Specialist Schools and Academies Trust, have been arrested and bailed.

Labour party officials including Ruth Turner, the director of communications, have also been questioned.

The Times reported on Monday that Mr Blair’s closest adviser, Jonathan Powell, will be questioned under caution by the Scotland Yard officers.

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