Arrested advisor rejects honours allegations

The former government advisor arrested last week under the loans for honours scandal has today insisted he has done nothing wrong.

In a statement issued by his lawyer, head teacher Des Smith "categorically denies the allegations" and says he will be "vigorously" contesting them.

Mr Smith was the first person to be arrested by police investigating claims that honours were being offered in return to loans to political parties or other contributions.

He was questioned by Scotland Yard over a possible breach of the Honours (Prevention of Abuses) Act 1925, before being released on bail pending further inquiries.

The 60-year-old resigned as an advisor on Tony Blair's flagship city academy's programme in January after allegedly telling an undercover reporter that anyone making donations to the scheme could expect to receive an honour.

Challenged about his comment later, Mr Smith, who remains a head teacher, told the newspaper involved it was "not possible" to acquire an honour in return for donations.

Today's statement from his solicitor, Peter M Black, said: "We have advised our client that in the light of the police investigation it would be quite inappropriate for him to make any statement at the present time, other than to state that he categorically denies the allegations and will be contesting them vigorously."

News of the arrest sparked speculation that Tony Blair would be questioned by police officers over the affair, but yesterday Downing Street appeared to go on the offensive by insisting there was nothing wrong with people involved in academies being rewarded.

"We are very positive about people who have given their money and expertise and time being recommended for seats in the House of Lords," an aide told a national newspaper.

"We want these people to be in the House of Lords and take the Labour whip. It is something we are prepared to celebrate."

The strategy is a risky one but the investigation into the honours scandal, which many believed initially to be a political move prompted by complaints from the SNP and Plaid Cymru, is getting closer and closer to No 10.

New transcripts of the tape between the undercover reporter and Mr Smith were published on Sunday, and appeared to implicate local government minister David Miliband, a close ally of the prime minister. His spokesman denied any wrongdoing.