Police are to launch a second major investigation into political funding after announcing a probe into the Labour donor scandal.

Just months after a lengthy investigation into the cash-for-honours affair was concluded, the Metropolitan Police said it would turn its attention to donations worth over £600,000 made through middlemen by the property developer David Abrahams.

Confirming the matter had been referred for a criminal investigation by the Electoral Commission, a Metropolitan Police spokesman said tonight: "Donations to political parties are dealt with in the first instance by the Electoral Commission. The CPS and the Electoral Commission have been in dialogue with us this afternoon.

"The Electoral Commission has now decided to refer matters to the Metropolitan Police Service for further investigation. The next stage is for us to receive and review their referral report."

The police decision to launch an investigation represents a fresh blow for Gordon Brown but it comes after the Prime Minister himself admitted the donations were "unlawful".

Mr Abrahams’s practice of giving money through four "middlemen" began in January 2003, since when he has donated more than £600,000, with a sudden surge of £250,000 from June this year when Mr Brown became Prime Minister.

Peter Watt, Labour's secretary-general, has already resigned over the affair and Jon Mendelsohn, the party's director of election resources, has been placed under pressure after it emerged that he knew details of the saga two months before it was made public. He claimed he had been reassured by Mr Watt that the practice was above board.

After Mr Brown admitted that Labour had unwittingly broken its own rules on donations transparency introduced 2000, both the Conservatives and Lib Dems demanded a police investigation.

The Labour Party tonight promised to cooperate with the inquiry. In a statement, it said: "The Labour Party will cooperate fully, and in every way, with the inquiry. What happened was unacceptable and it is in the public interest that every question is answered."

Opposition parties welcomed the move to launch an investigation today. Mr Huhne, the Liberal Democrat MP and party leadership candidate, said: "I think this is inevitable. Clearly, the Electoral Commission has come to the same conclusion that I have come to. It is important in my view that we are seen as clean in our politics."

Chris Grayling, the Conservative Work and Pensions spokesman, added: "It is absolutely right and proper that the authorities should be brought in to look at what's happened. I think this investigation was very necessary."

Today's inquiry follows the cash-for-honours investigation which ended earlier this year with no charges being brought against party figures. It was launched in March 2006.

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