Funds scandal: Police quiz Blair

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LONDON, England (CNN) -- British Prime Minister Tony Blair has been questioned by police in connection with a political fundraising scandal, his spokesperson said.

In a highly unusual move, Blair was questioned at his Downing Street office on Thursday about allegations that donors or lenders to his ruling Labour Party had been offered honors such as knighthoods and peerages in exchange for their financial support.

He was not spoken to under caution, his spokesperson said, which means the prime minister was questioned as a witness and not a possible suspect.

CNN's European Political Editor Robin Oakley said this fact indicated that police investigating the case believe they are unlikely to bring criminal charges against Blair, who became prime minister in 1997 promising to clean up politics.

"Even though we've been expecting this for some time this is a huge embarrassment to Blair as the investigation is taking place under an act introduced by his own government."

The investigation into the cash-for-honors scandal began in March, when police began looking into allegations raised by the opposition Scottish National Party about four people who gave loans to Labour and who were later nominated for peerages.

Oakley said Labour faced a $35 million shortfall as it prepared to fight the 2005 election but sought loans rather than gifts because, under a loophole in the Political Parties, Elections and Referendums Act 2000, a political party does not need to declare loans.

Other senior members of the Labour Party have already been questioned by officers as have opposition politicians including former Conservative leader Michael Howard.

Lord Levy, Labour's unofficial fundraising chief, is one of three people arrested since April in connection with the probe. So far no one has been charged. (Full story)

The prime minister, who is expected to leave office next year, told officers on Thursday why he nominated particular individuals for peerages, the Downing Street spokesman added.

Blair's spokesman said: "Given that the SNP made complaints specifically about people nominated for peerages by the prime minister we expected that police would ask to see the PM as the investigation reached its conclusion.

"The prime minister explained why he nominated each individual. He did so as party leader in respect of those peerages reserved for party supporters, as other party leaders do.

"The nominations were therefore not honors for public service but expressly party peerages given for party service. In those circumstances the fact that they had supported the party financially could not conceivably be a barrier to their nomination."