TONY BLAIR will fly off on his summer holiday knowing that on his return he will be the first serving British prime minister to be interviewed by police in a corruption investigation.

Downing Street publicly denied again yesterday having been given any indication that the Prime Minister would be interviewed by the Scotland Yard team of detectives leading the cash-for-peerages inquiry. But The Times has learnt that Mr Blair and Jonathan Powell, his chief of staff, will be interviewed over the summer before the party conference at which his leadership was already certain to be an issue.

They will be questioned about what they knew of peerages that were offered to four millionaires who lent more than £5 million to the Labour Party before last year’s general election.

They will also be asked whether they knew that the curry magnate Sir Gulam Noon was asked not to declare his £250,000 loan to the House of Lords appointments watchdog and whether the terms of the loans were changed this March.

The last occupant of Downing Street to be interviewed in a corruption inquiry was David Lloyd George in the 1920s. His sale of peerages led to the 1925 Act that makes it an offence to offer honours for cash.

Other key Labour figures to be questioned include Matt Carter, who was party general secretary at the time that the loans were negotiated, and Ruth Turner, the Downing Street director of government relations, who visited Ian McCartney, who was then chairman of the party, in hospital around the time that he signed peerage nomination forms confirming that the candidates had no financial links with Labour.

Lord Levy, the personal fundraiser of the Prime Minister, was interviewed again yesterday by officers at a North London police station.

While he was being questioned the police officer leading the inquiry was briefing MPs about the state of his investigation. John Yates, an assistant deputy commissioner at Scotland Yard, revealed to the Public Administration Committee in a private session that 48 people had been questioned, 13 under caution, the majority of them Conservatives.

Three Labour donors have declined to be questioned. The Times has learnt that one of them was the clothing tycoon Richard Caring, who is worth £300 million. Mr Caring, who lent the party £2 million, is the owner of The Ivy, the fashionable London restaurant.

In a statement Lord Levy, whose questioning by the police was cut short on Wednesday after the police station was evacuated because of a nearby fire, indicated his continuing anger at the arrest. The statement said: “Lord Levy remains deeply disappointed that the police decided that they should use their powers of arrest for the meeting.

“Lord Levy has always been ready and willing to co-operate and to meet the police at any time of their choosing. He has always been only too willing, also, to provide the police with any documents that they might have needed, and he continues to do so.

“This underlines that the arrest was unnecessary, disproportionate and, as has been described by others, entirely theatrical. The only result has been a media circus, which has distracted from the issues under consideration. We hope the police will concentrate on the investigation and bring it to a swift conclusion.”

But Whitehall sources have told The Times that Lord Levy had been arrested because of a failure of senior party officials to disclose correspondence relating to the secret loans from wealthy businessmen in 2005.

The arrest was deemed necessary to ensure that certain questions arising from missing documentation would be answered, the source added. “His arrest by no means means that he will be charged. It just ensures that the process of law will take place smoothly,” said the source. “There has been a distinct lack of transparency. It appears that the voluntary process has not worked.”

The Prime Minister will be spared the political embarrassment of the interview, with Mr Yates taking place in Downing Street. It will be held either in Mr Blair’s Commons office or an alternative premises.

The timing has uncomfortable echoes of the summer of 2003 when, within days of returning from a family holiday in the Caribbean, Mr Blair was interviewed in the Hutton inquiry into the death of the government scientist David Kelly.

The questioning of Mr Powell will maintain the pressure on Downing Street as he is the longest-serving and most trusted adviser of Mr Blair, with longstanding links to Lord Levy. The two men set up and managed the blind trust that funded Mr Blair’s private office in opposition. The use of “blind trusts” for political purposes was in effect outlawed in 2001 after it was revealed that they had been used to channel millions of pounds into the private office without the identities of rich benefactors being disclosed.

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