David Cameron turned up the heat on Gordon Brown yesterday by saying that his claim to have known nothing about unlawful cash gifts “beggars belief”.

The Tory leader’s attack came as the businessman at the centre of Labour’s donations scandal, David Abrahams, hinted that he is preparing to name ministers when he is asked by police to say who knew that he had given cash through third parties.

It emerged that the businessman was invited to a fundraising gala dinner at the party’s annual conference only two months ago – also raising questions about who in the party knew about the funding arrangement.

Mr Brown’s attempts to draw a line under the affair did enjoy partial success when the Conservative leader said that he was prepared to reopen negotiations over party funding. The talks, which will include introducing a £50,000 cap on individual donations that includes cash from the unions, could start this week.

Gordon Brown's Black Wednesday

The Northern Rock disaster has torn away any remaining credibility the Prime Minister had

BACKGROUND

• Sorry story tests Gordon to the limit

• Gordon, how wonderful, wise and talented am I?

• Brown’s brain and his hand are not always connected

• How 'cruel' schooling scarred Brown

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• Labour may have to risk public’s wrath

Although Mr Brown will be delighted to have widened the focus to all parties’ funding, significant questions remain over how Labour came to accept more than £600,000 in illegal donations from Mr Abrahams, a property developer from Newcastle upon Tyne.

Most pressing is which figures other than Labour’s former general secretary, Peter Watt, and Mr Brown’s chief fundraiser, Jon Mendelsohn, knew that Mr Abrahams was giving cash through third parties.

The businessman said yesterday that he was preparing to tell the Metropolitan Police the names of the “very few officials and party figures in the higher echelons of the national party structure” who were aware of the arrangement when the investigation begins in earnest this week. Mr Cameron, insisting that Labour’s admission that it had broken the law was separate from the issue of party funding, said that Mr Brown was acting “a bit like the man who has been caught waving a gun around and now is saying, ‘Yes, it’s terrible, we really must do something about gun control’.

“What we have got to work out is who knew about this and who was told about this in the Labour Party. I find it pretty incredible that only one or two people knew about it. Every day we find out about more people who knew and how high that went and what the Prime Minister was told.”

He added: “Are we really meant to believe that Mr Mendelsohn didn’t know what the law was, didn’t tell anyone about it, that [Mr] Brown knew nothing? It beggars belief.”

Labour endured more embarrassment north of the Border where a separate funding scandal threatens to end the career of Wendy Alexander, the party’s leader in Scotland and a close ally of Mr Brown.

Ms Alexander has been under mounting pressure after it emerged that Paul Green, a Jersey-based businessman, had given £950 to her campaign fund. An investigation by the Electoral Commission into an apparent breach of the law that limits donors to those eligible to vote in British elections may lead to a police inquiry.

Yesterday it emerged that her campaign team may have been well aware of Mr Green’s status more than three weeks ago. Ms Alexander has said that she and her team learnt of the illegality of the donation only last Thursday.

A computer document has emerged that lists her husband Brian Ashcroft as its “author”. It contains a list of donors compiled on November 5 and confirms that a £950 donation was made by Mr Green using his Jersey address. Next to the entry is written the word “permissible?”.

Ms Alexander’s version of events was already under intense scrutiny after it was claimed on Friday that she wrote a personal letter of thanks to Mr Green at his Jersey address. She spent yesterday talking to close aides and family before issuing a statement vowing to carry on. There were suggestions that Mr Brown personally persuaded her to tough it out.

Despite the continuing problems, Mr Brown will be confident that concessions over union financing may be enough to regain the political initiative lost in a welter of stories of sleaze, incompetence and division.

A funding reform package could mean the introduction of a £50,000 cap on individual donations. Trade unions would be subject to the cap but “affiliation fees” to Labour, a large part of their contribution, would be broken down into donations from individual union members.

The unions would be forced to inform members that they were under no obligation to contribute and show them how much their subscription would fall by if they opted out.

Parties could also face spending limits covering the course of a Parliament, not just during the period leading up to and including a general election. The Tories have faced criticism for pumping large sums from wealthy donors, such as Lord Ashcroft, into marginal seats.

Ministers hope that an outline package of reforms can be thrashed out by the end of the year.

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