Academy sponsors face police inquiry
It is understood that Sir David Garrard and Barry Townsley appeared on Tony Blair's list of prospective peers, after each gave significant sums to academies, as well as lending money to fund Labour's general election campaign.
However, their nominations were blocked by the House of Lords appointments commission.
Sir David, co-founder of the property group Minerva, gave pound;2.4 million to the Business academy in Bexley, south-east London. He was knighted in 2003 for charitable services.
Barry Townsley, a city broker who gave pound;1m to the Stockley academy, in Hillingdon, was made a CBE in 2004 for charitable services to education and the arts.
Neither was available for comment this week. Both now face being questioned by police as part of the investigation.
Downing Street refused to say whether the pair were put forward for peerages specifically because of their involvement in the academy programme.
However, a spokesman confirmed earlier reports that it was the belief of the Government and the Labour party that people who put money, time, effort and commitment into the academy programme should be rewarded and celebrated.
A Downing Street insider told one Sunday newspaper that the Prime Minister's personal recommendation of Sir David was as a result of his commitment to education.
Mr Blair hoped he would become a "cheerleader" for academies in the Lords.
The granting of honours to those supporting controversial policies dates back to city technology colleges, the predecessors of academies.
In 2004, for example, there were knighthoods for John Lewis, principal of Dixons city technology college, Bradford, and Michael Wakeford, chairman of governors at Walsall academy in the west Midlands.