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In a letter sent to the Prime Minister today - his third in two days - Mr Grayling noted that the Mr Blunkett's entry in the parliamentary Register of Members' Interests made clear that he had worked as an adviser for ORT - a worldwide Jewish educational charity - some time between January and April.

Mr Grayling pointed out that Mr Blunkett had been told clearly by Lord Mayhew that any paid work, even for charity, was covered by the advisory committee. He added: "Nonetheless, I have spoken to the Committee this morning and have been told that Mr Blunkett made no attempt either to brief them about or to consult with them over this appointment.

"This appears to be a third clear example of a breach of the Ministerial Code by Mr Blunkett. Can you confirm to me please what action you intend to take over these breaches."

So far, Downing Street has shown its support for Mr Blunkett. After the minister's statement last night on the sale of the shareholding, Mr Blair's spokesman said that a line had been drawn under the whole matter.

But memories are still fresh of the long drawn-out and damaging 'Nannygate' scandal that forced Mr Blunkett to resign as Home Secretary last December, and No 10 will be keen to avoid any repeat.

Sir Malcolm Rifkind, the Shadow Work and Pensions Secretary, said that Mr Blunkett was once a pillar of the New Labour government but had now become an "embarrassment".

He said: "The reality is that David Blunkett is damaged property. He has form. The judgement will have to be made whether he continues to be an asset for the Government, or whether he has become a liability."

Sir Malcolm said that the problems facing his counterpart was not just a matter of whispers in Westminster: "The Department of Work and Pensions is in crisis with pensions and the CSA, and the Minister is distracted - not by a hanging offence - but by a misjudgement."

Sir Malcolm stopped short of demanding a resignation - the Tories have called for an "urgent inquiry" - but said: "Holding a senior position in the Cabinet requires an exceptional level of judgement: He used to have that judgement, but now seems to have lost the plot."

But a Labour backbencher, Ian Gibson, suggested that Mr Blunkett should consider resigning. Dr Gibson told BBC Radio 4's The World At One: "It was a very daft thing to do and if it was me, I would think about taking an early bath. I can’t see that it is sustainable really."

Mr Blunkett’s fellow Sheffield MP Clive Betts told the programme: "I don’t think that’s the view that the vast majority of Labour MPs would take. They are more interested in David driving forward the pension and welfare reforms which are central to this Government’s agenda."

The central question remains why Mr Blunkett - just weeks after he had been forced to resign as Home Secretary after asking for a visa to be fast-tracked for the nanny of his one-time lover Kimberley Quinn - ignored repeated advice to prevent further embarrassment.

Nick Robinson, the BBC political editor, suggested on Radio 4's Today programme that his motive may have been a sense of responsibility towards his grown-up sons: by pursuing a costly paternity claim against Ms Quinn through the courts he was spending their inheritance. The shares were an opportunity to quickly recoup this money, he suggested.

Before his interview with the Sheffield Star, Mr Blunkett had refused to shed any further light on the matter. At 9am today, he told reporters outside his London home: "I don’t conduct interviews on the street."

Pursued, he asked them to leave, saying: "Right, that’s it. You’ve had your turn. Under the Press Code of Conduct you can’t harass me any more."

Mr Blunkett told his local newspaper that he had made details of his involvement with DNA Bioscience public in May after his reappointment as a minister. He said: "You can’t do more than put in a press release the specific contact you have had with an outside organisation. No one else has ever done that.

"People will make their own judgments. I am getting on with my job at the moment."

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