Smash hit

"The letter is soliciting funding from me, and I don't need a letter from anybody in the Labour Party to solicit donations because I'm a regular donor and they can rely on me when they need me," Mr Abrahams said.

He read out parts of the letter, which said: "The party is of course very appreciative of all the help and support you have given over many years. At some point I would like to have the opportunity to talk to you personally about our plans.

"As one of the party’s strongest supporters it is only right that you are kept informed with what we are doing and the priorities that we are assigning to our resources. Any time that you are next in London I would very much like to meet to discuss this."

During another mauling at Prime Minister's Questions, Mr Brown backed Mr Mendelsohn's version of events as he came under attack by Mr Cameron, the Conservative leader.

"On September 3 he started employment in the Labour Party. He has had absolutely no involvement in the donations that have been made," Mr Brown said. "These donations have been happening for a period of four years before he took office."

The Opposition leader retorted: "Are you telling us that Mr Mendelsohn knew and did not tell either you or the police? Is that an acceptable situation?"

Mr Brown told him: "Mr Mendelsohn says in his statement that he was led to understand by the general secretary of the party that this had been cleared with the EC [executive committee].

"He also says he was unhappy in principle with these arrangements and he had approached one of the people involved and was seeking a meeting to sort these things out.

"But, of course, if anything untoward has happened in this respect, that will be a matter for the inquiry and we will take whatever action is necessary to sort this out."

Amid mounting uproar, Mr Cameron concluded his attack by saying: "We have had 155 days of this Government, we’ve had disaster after disaster. His excuses go from incompetence to complacency and there are questions about his integrity."

To Tory cheers, he said: "Aren’t people rightly asking now: ’Is this man simply not cut out for the job?’"

Philip Webster, political editor of The Times, said that Mr Brown's strategy was to deflect all criticism by saying that everything would be investigated by Lord McCluskey, a retired judge, and Lord Harries of Pentregarth, former Bishop of Oxford, in an inquiry he announced yesterday.

"They are using the existence of this inquiry to deflect any criticism coming at them," he said. "That is Gordon Brown's way of trying to ride the storm."

The scandal over the donations has threatened to engulf Labour's upper ranks after it emerged that several Cabinet ministers appeared to have accepted funding from Mr Abrahams or his proxies for their deputy leadership campaigns.

Ms Harman has come under growing pressure after it emerged that her campaign team had accepted a cheque for £5,000 from Janet Kidd, the secretary who has channelled £147,000 towards Labour on Mr Abrahams's behalf.

Ms Harman said of Mrs Kidd: "I do not know whether my campaign team contacted her or she was contacted by my campaign team." But Labour and Tory politicians were asking why Ms Harman, who is married to the party treasurer, Jack Dromey, did not raise questions about the source of the money – in particular because her rival Mr Benn was told by his supporters.

Baroness Jay of Paddington, on Mr Benn's campaign team, noticed that the money did not originate from Ms Kidd and called Mr Abrahams to ask him to donate the money under his own name.

The fact that Baroness Jay knew of the funding deception raises the question of how many other senior party figures were aware of the arrangement, which Labour claimed on Monday had been known only to Mr Watt.

Mr Abrahams said that his conversation with Baroness Jay had given him an inkling that there might be a problem with his secret donations but that he had simply assumed that the rules on donating to leadership campaigns must be different.

Douglas Alexander, the International Development Secretary and former Transport Secretary, has also been dragged into the row after it emerged that ministers intervened with the Highways Agency to ensure that planning permission was granted to Mr Abrahams's associates for a business park in Co Durham.

A spokesman for Mr Alexander denied that he had ever met Mr Abrahams or knew anything of the matter.

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