Prince William was with his brother at the party, which was held by Richard Meade, the triple Olympic gold medallist, who is a close friend of the Prince of Wales and Camilla Parker Bowles.

The theme of the party at Mr Meade’s equestrian centre in Wiltshire on Saturday night was Colonials and Natives. It was attended by more than 400 people. Mr Meade is a former boyfriend of the Princess Royal and they remain close friends.

Clarence House moved swiftly last night to try to defuse the row after photographs emerged of Prince Harry, 20, sporting the apparently home-made red swastika on the left arm of a military-style shirt.

The Prince of Wales was appalled by his son’s lack of judgment, which will plunge the Royal Family into another embarrassing row. Harry apologised immediately. Clarence House is braced for protests from leaders of the Jewish community. A spokesman for the Board of Deputies of British Jews said: “We are pleased that Prince Harry has apologised. Such an incident is in bad taste, particularly in the run-up to Holocaust Memorial Day (January 27), for which the Queen will be leading the commemorations in the United Kingdom.”

Terry Burton, a spokesman for veterans of the Second World War, said the prince’s costume was an insult to soldiers who had faced German troops in battle and were still dealing with painful memories. “Maybe people think it’s funny to use inappropriate fancy dress like this, but I just find it disgusting,” he said.

A Clarence House source said that Harry had apologised to his father for his inappropriate choice of costume at the fancy dress party. “He knows it was a mistake and he has said sorry,” said the source.

The incident is the latest in a damaging series generated by Harry, which often involve excessive drinking. But the decision to be seen openly wearing a swastika is regarded by courtiers as the most serious offence to date. “It was bloody stupid,” one senior source said last night.

Prince Harry, who has been given a place at Sandhurst Military College, has had his entrance delayed until the summer because of a leg injury he sustained in a riding accident. Last night there were calls for the prince to be prevented from becoming a British Army Officer. Doug Henderson, Labour MP for Newcastle upon Tyne North and a former armed forces minister, said: “After the revelations this evening I don’t think this young man is suitable for Sandhurst.

“If it was anyone else, the application wouldn’t be considered. It should be withdrawn immediately,” he said.

The Colonials and Natives theme of the party caused further embarrassment to Clarence House last night. It contained uncomfortable echoes of the row involving Princess Michael of Kent, after she caused uproar in an upmarket New York restaurant last April. Having taken exception to the noise levels generated by a group of black diners she was accused of telling them, after an altercation to “go back to the colonies”. She denied the allegation and said that she had been misrepresented.

The Duke of Edinburgh, one of the most gaffe-prone members of the Royal Family, caused offence in 1997 when he addressed Helmut Kohl, then the German Chancellor, by Hitler’s Nazi title, Reichskanzler.

The Royal Family has been highly sensitive about any links to Nazi Germany after the Duke of Windsor, who was regarded by some as a sympathiser, visited Germany with Mrs Simpson as the personal guest of Hitler in 1937.

The swastika incident is the latest in a series of embarrassments involving Prince Harry. In October Prince Harry was accused of cheating during his History of Art exam at Eton by a former teacher, Sarah Forsyth, who is claiming unfair dismissal. The examination board, Edexcel, cleared Prince Harry.

In November he became involved in a scuffle with a paparazzi photographer outside a London nightclub.

FAMOUS FANCY DRESS FAUX PAS

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