Corruption inquiry moves closer to No 10

Police arrest government adviser who said honours were for sale
The police investigation into "cash for honours" took a dramatic turn yesterday when officers arrested a government adviser who said he could deliver knighthoods and peerages for sponsors of Tony Blair's flagship education programme.

Des Smith, who resigned from the council of the Specialist Schools and Academies Trust (SSAT) in January after telling an undercover reporter that Downing Street would recommend donors "for an OBE, a CBE or a knighthood", was released on bail after a day of questioning by officers from Scotland Yard's specialist crime directive.

Lord Levy, the Labour party fundraiser who is Mr Blair's tennis partner, is president of the SSAT. Lord Adonis, the junior education minister, wooed potential sponsors when he worked in the Downing Street policy unit as the prime minister's education adviser.

The arrest was the first since the inquiry began and suggests the investigation, under deputy assistant commissioner John Yates, is going wider than first thought. Until now Mr Smith has not been linked to the inquiry, which was launched following the revelation that four people nominated by the prime minister for peerages had also given loans to Labour.

Mr Blair has not been interviewed by police and it is understood that so far neither Lord Levy nor any Downing Street officials have been questioned. No 10 would not comment last night, saying it was a matter for the police.

Mr Smith told an undercover Sunday Times reporter that for a donation of £10m "you could go to the House of Lords". It was unclear last night whether he was known to Lord Levy, but Sir Cyril Taylor, chairman of the trust, had recommended him as a project director. However, Sir Cyril told the Guardian last night that honours had not been offered in exchange for academy sponsorship.

He said: "The important thing is he [Mr Smith] didn't have any role in sponsorship whatsoever and therefore any statements he made weren't justified. It would be a pity if successful business people and other comparable bodies were discouraged from supporting state education because of coverage of this nature."

Yesterday Mr Smith was taken by police from his home in Wanstead, north-east London, to a central London police station. He was interviewed by detectives under the Honours (Prevention of Abuses) Act 1925, for which the maximum penalty is two years in prison or an unlimited fine.

The Scotland Yard inquiry was launched following complaints from Scottish and Welsh nationalist MPs after it emerged that Mr Blair had nominated four people for peerages who had made undisclosed loans to the Labour party. It was later widened to include loans and donations from other parties.

Mr Smith, 60, is due to retire this summer as headteacher of All Saints Catholic School and Technology College in Dagenham, Essex.

There are 27 academies, backed by sponsorship of up to £2m a time. The government wants to create 200 in disadvantaged areas by 2010. The state provides most of the capital funding of around £25m per academy.

Seven academy sponsors have been honoured since Labour came to power. They are Sir Frank Lowe, Sir David Garrard, Sir Clive Bourne, Sir Martyn Arbib, Sir Euan Harper (head of the United Learning Trust), Roger de Haan CBE and Jack Petchey OBE. Some were honoured before they sponsored academies.

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