LONDON - Tony Blair has been embroiled in a fresh 'cash for favours' row over his nomination of prominent Labour Party donors for peerages.

The parliamentary sleaze watchdog has blocked the Prime Minister's working list of 28 peers, including some high-profile businessmen who have donated thousands of pounds to his party.

He submitted the list of 11 Labour peers, eight Tory peers, five Lib Dem peers, and four Northern Ireland peers in November, which was first revealed in the Independent on Sunday newspaper.

Now the House of Lords Appointments Commission has put a hold on the peerages, pending further checks.

"The appointments commission is holding it up because they are dissatisfied with some of the names on the Prime Minister's list. Some members of the commission are holding out as a matter of principle," one source close to the cross-party Commission of peers.

"They think it's getting ridiculous. The embarrassment now for Labour is that some people are due to get honours and if they don't get them, they will have a right to be peeved.

They have told these people they are going to get ermine and it's being held up."

Those nominated by Mr Blair for peerages include high profile Labour donors, such as Dr Chai Patel, who runs the Priory clinics; Sir Gulam Noon, 69, founder and chairman of an Indian food company in the UK; Barry Townsley, a stockbroker who gave £6,000 to Labour but also sponsored a city academy in Hillingdon; and Sir David Garrard, a property developer millionaire who donated to Labour and contributed £2.4 million to Bexley city academy but previously gave £70,000 to the Conservatives under William Hague.

A number of Tory donors are also on the Conservative list drawn up by David Cameron's predecessor as leader, Michael Howard.

But it threatens to reopen the row over 'cronyism' that erupted when Mr Blair awarded a peerage to Paul Drayson, a Labour supporter who donated over £1 million to the party.

Lord Drayson founded the vaccine company PowderJect, which secured Government contracts for smallpox vaccine. He has since been made a Labour Government defence minister in the House of Lords.

The commission was set up as part of the reform of the Upper Chamber after the removal of hereditary peers to answer criticism that future Prime Ministers could abuse their power of patronage over life peerages.

There is no suggestion of any wrong doing by any of those on the new list, but Commission members asked for further evidence on the tax status of some of the nominees, who are normally required to pay tax in the UK.

The working list also raises the wider issue of the use of peerages to reward major party donors.

Cash for peerages caused a furore in the early 20th century when the then Liberal Prime Minister, Lloyd George accepted bribes for honours.

Trade union leaders were traditionally given Labour peerages, but it has now become common for businessmen who have donated large sums to parties to be given peerages.

Labour's list contains more traditional Labour figures such as Sir Bill Morris, 67, the former general secretary of the Transport and General Workers Union, Keith Bradley, 55, former MP for Manchester Withington, who lost his seat in May; Maggie Jones, an official of the health workers' union Unison; and Joyce Quin, 60, the former Labour home office minister who stood down at the last election.

The Tory list includes party donors Robert Edmiston, 59, chairman of car importers IM Group, who gave £250,000 to Tory party funds; and Mohamed Sheikh, a Croydon solicitor who donated £38,000 to the Tory Party.

Also to be made Tory peers are Sir Sandy Bruce-Lockhart, chairman of the Local Government Association; Jonathan Marlan, the Tory Party treasurer, who has donated £50,000 a year to Tory funds for some years; Rodney Leach, chairman of the anti-euro campaign, Business for Sterling; and David James, the business trouble-shooter who was brought in to rescue the Millennium Dome and draw up £35bn of spending cuts for the Tories before the last election.

The Liberal Democrat list submitted by Charles Kennedy includes Celia Thomas, who worked in the whips office in the Lords; John Lee, 63, a former Tory MP who defected to the Lib Dems in 2001; and Brian Cotter, 69, a former Lib Dem MP for Weston-super-Mare who lost his seat at the last election.

The Northern Ireland peers include three members of Ian Paisley's Democratic Ulster Unionist Party, including Eileen Paisley, Rev Paisley's wife; and David Trimble, the former leader of the Ulster Unionist Party.

- INDEPENDENT

By Colin Brown