Minister quits as loan net tightens

The peer admitted he had been interviewed as a witness over cash-for-peerages but denied his resignation was linked to the scandal.

See also:

• Malcom Wicks replaces Sainsbury in mini-reshuffle

• 'Only Blair and his chairman knew of secret Labour loans'

• Minister blasts cash-for-peerages probe

But Whitehall sources claimed Labour's biggest donor was tired of being tainted in the affair.

One said: "He was fed up with his name being dragged through the mud whenever cash for honours came up. Every time there was a controversy about party funding he was put at the centre of it and eventually he had had enough."

The supermarket billionaire, pictured, has bankrolled the party to the tune of £7million.

His departure casts a new shadow over Downing Street with Tony Blair increasingly isolated in the police investigation into the alleged sale of peerages to party backers.

Lord Sainsbury championed controversial causes such as GM technology and was one of the longest-serving junior ministers.

Other sources suggested that Lord Sainsbury's departure was part of the exodus of Blair allies from the Government and No10 in advance of the Prime Minister's own retirement.

But a No 10 source said: "This is not a sudden thing at all but something that has been planned and talked about for quite a long time.

"This was a retirement not a resignation. At 66 he wanted to pursue charitable and business work. He has other things he would like to do."

This afternoon, Lord Sainsbury said: "This is the right moment to step down. I'm not directly involved in whether peerages were offered for cash, I am not the party's fundraiser and I have been a peer for nine years, so no one is suggesting I was in the business of buying a peerage."

Mr Blair's official spokesman said: "Lord Sainsbury is hugely valued and it is in no small part down to him that this country's science base is in better shape than for decades."

Lord Sainsbury will now conduct a review on behalf of the Government into science and innovation policies across Whitehall, which is due to report next summer.

Critics still say the peer has already enjoyed more influence than most ministers over a single subject.

Lord Sainsbury's fortune, estimated at up to £2 billion, comes largely from his family's supermarket empire. He was chairman and chief executive of the group from 1992 to 1998 and finance director for 17 years before that.

He was ennobled by Mr Blair after Labour's election victory in 1997 and was made science minister the following year.

The appointment has caused controversy because of his financial links to the party. Fresh questions were asked about his appointment in April, when he had to apologise for failing to declare a £2 million loan to Labour.

He was cleared by Mr Blair of breaching the ministerial code.