The night Labour paid homage to Lord Cashpoint at a £6,000 party - paid for by you

Lord Levy, who has twice been arrested by police probing claims that honours were 'sold' to wealthy businessmen by Labour, made his comments during his farewell speech at the lavish reception attended by Mr Blair and senior Cabinet ministers.

As he paid tribute to leading Government figures present, Lord Levy singled out former Permanent Secretaries John Kerr and Michael Jay for their help with his work as Mr Blair's Middle East envoy.

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In a passing reference to the scandal which has engulfed the Prime Minister and his closest aides, Lord Levy quipped that both officials were now in the House of Lords. But he added: "Nothing to do with me."

MPs have criticised the Foreign Office decision to host the farewell party for Lord Levy, which will set taxpayers back £6,000.

In a defiant show of support for the peer, the Prime Minister and a host of other politicians attended the champagne reception in Whitehall.

Mr Blair attempted to brush off the ongoing police inquiry by making a warm speech in which he paid tribute to Lord Levy's work in the Middle East.

He told guests: "The work that Michael has done for me in respect of the Middle East over these past few years has been absolutely invaluable.

"He has done so with charm and persuasion and he has done it not merely in the Middle East but outside of it as well."

He added: "I would like to thank him for everything he has done for our country."

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While many senior Labour figures attended the event, which was held at Lancaster House, an opulent mansion in Central London, Gordon Brown was conspicuous by his absence in what may be seen as a deliberate snub.

His wife Sarah, by coincidence, turned up to a wedding reception in the same building.

Out of those who did come to Lord Levy's party, Foreign Secretary Margaret Beckett described the ex-pop music impresario as a 'tower of strength' and praised his invaluable judgment.

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The 260 guests also included David Blunkett, Peter Hain and Geoff Hoon.

A host of senior figures from the Middle East and the media were also present, including broadcasters Lord Bragg and Sue Lawley and former Daily Mirror editor Piers Morgan.

The Prime Minister's close aide Jonathan Powell was also at the event.

Ministers last week confirmed that the estimated £6,000 for the controversial send-off would be met by the Foreign Secretary's entertainment budget.

The timing of the event has raised eyebrows as Lord Levy remains on police bail after being arrested over claims honours were traded for cash.

He was arrested and quizzed in the probe which was initially into the sale of honours, but later broadened to investigate any cover up attempt.

Lord Levy - known as Lord Cashpoint for his ability to raise millions for Labour - was rebailed two weeks ago.

The Crown Prosecution Service is currently considering a 213-page file from detectives following a 14-month investigation.

The 61-year-old peer will stand down as envoy this month after nine years. He had been widely expected to depart when Mr Brown takes over at No 10.

Lord Levy has denied all accusations of wrongdoing in the honours affair.

Opposition MPs have attacked the Foreign Office for hosting the lavish reception at the taxpayers' expense.