Tycoon gave £500,000 to Labour just after peerage

A tycoon at the heart of cronyism allegations gave £505,000 to the Labour Party weeks after receiving a peerage, it was revealed today.

Paul Drayson was elevated to the House of Lords in Tony Blair's list of Labour peers in May.

Accounts published this afternoon disclosed he gave the cheque to party funds on 17 June, a week before he made his maiden speech in the Upper House.

The coincidence of the peerage and the gift is the second time Lord Drayson's gifts to Labour have aroused controversy. He hit the headlines when it emerged he was made sole supplier of smallpox vaccines to the Government two years ago, at the time he was giving a total of £100,000 donation to Labour.

The lucrative contract earned his company, Powderject, an estimated £20million instant profit. It was criticised because the £32million deal was not put out to competitive tender and rival firms said they were excluded from bidding.

Government documents later disclosed that the Ministry of Defence wanted to buy from rivals, but discovered Powderject had cornered the market just in time by signing an exclusive distribution contract with a European manufacturer of the vaccines, needed to protect Britons from terrorist attack.

Lord Drayson's latest donation to Labour - his biggest gift yet - was drawn from his private funds, according to the Electoral Commission accounts. He is reported to be worth ?100 million and has committed himself to spending three days a week on Lords business as a "working peer".

Born in Greenwich, he styled himself Lord Drayson of Kensington because he now has a house in The Little Boltons. His support for Labour under Tony Blair raised eyebrows because he was thought to have been an admirer of Baroness Thatcher.

He gave two gifts of £50,000 each to Labour in 2001, when the Government was deciding to buy vaccines for emergency workers in the wake of the September 11 attacks.

It later emerged that Lord Drayson had been in a group of businessmen who had breakfast-with the Prime Minister in Downing Street at about the time MoD experts were meeting to decide what type of vaccine to buy.

No 10 has always denied the subject of the vaccine came up during the breakfast, but the coincidence fuelled concern that Mr Blair's links with supportive businessmen could expose him to controversy.

After selling his company last summer, Lord Drayson described himself as "a very successful guy through my own hard work".

Labour's full list of donations declared to the Electoral Commission showed they pulled in more money than any other party in the April to June quarter this year. The party amassed a total £4.38million, much of it in gifts from the big trade unions.

The Conservatives were given £3.65 million, up almost a million pounds on the previous quarter and reflecting a recovery in party finances since Michael Howard took over.