Labour was embroiled more deeply in the donations row last night after claims that its own officials had helped lawyers acting for David Abrahams to draw up legal agreements that enabled him to anonymously give more than £600,000 to the party.

In the latest twist to the affair, it was alleged that unnamed Labour staff believed there to be loopholes in the law that allowed the millionaire property developer to make the donations legally.

The party refused to comment on a report in The Guardian suggesting that John McCarthy, the Newcastle-based solicitor acting for Mr Abrahams, had worked with officials in 2003 on covenants that they believed bypassed the 2000 Political Parties Act.

Lord Triesman, who was Labour’s general secretary at the time, has categorically denied any knowledge of an arrangement under which Mr Abrahams gave to the party through intermediaries.

The report alleged that two middle-ranking officials took legal advice from Labour’s own lawyers, and sought approval from senior party members.

Under the arrangements which, it is claimed, were drawn up by Mr McCarthy and put to the Labour officials, Mr Abrahams covenanted funds to his associates and fellow company directors Ray Ruddick, Janet Kidd and Mr McCarthy. They then used the money to donate to the party in their names.

The report said that the covenants, or bonds, were used as a means of ensuring that the intermediaries used the money only for the purpose that Mr Abrahams had intended.

They were also intended to make sure that neither the businessmen nor his associates had to pay tax on what were technically personal gifts from him to them.

A Labour spokesman said that the party could not comment because of the current police and internal inquiries. Mr Abrahams office also told the newspaper that it would not comment.

Mr Abrahams may not get his money back as Gordon Brown has suggested. Sources from the Electoral Commission have said that it is likely to be forfeited and paid into government reserves.

The latest revelations came as the Prime Minister appointed Sir Christopher Kelly, 61, the chairman of the NSPCC, as standards watchdog. Seven months after the post became vacant, Sir Christopher has become chairman of the Committee for Standards in Public Life. Following a recommendation from the Public Administration Select Committee, No 10 has said that Sir Christopher will do the job for a maximum of five years. Yesterday at Prime Minister’s Questions, David Cameron attacked Mr Brown for taking so long to make the appointment and reminded him that Sir Alistair Graham, Sir Christopher’s predecessor, had said the last fortnight had demonstrated “monumental incompetence and an ignorance of the law which beggars belief”.

Mr Brown demanded that Mr Cameron bring the Conservatives back to the cross-party talks on party funding. He denied the Tory leader’s claim that the internal inquiry into the donations row had been suspended, saying that Lord Whitty was still collecting information and that interviews were at the discretion of the police. Quoting from leaked minutes of Labour’s National Executive Committee, he said they made clear that aspects of the Whitty review would have to be placed on hold.

Sir Christopher joined the Treasury at 24 and rose to become the Health Department’s Permanent Secretary in 1997. He is a senior adviser to KPMG and has worked for the Financial Ombudsman Service since 2002. Jon Cruddas, who stood in Labour’s deputy leadership election, has said in the New Statesman that the party should appoint a general secretary independent of Mr Brown, strip Harriet Harman of her role as chairman and reassert internal democracy.

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