The Labour Party confirmed today it had received almost £14 million in secret loans from individual supporters last year - £10 million more than it had previously admitted.

A spokesman said in a statement that a total of £13,950,000 was received and that all loans were "in full compliance" with party funding rules.

The total is considerably higher than the £4.5 million worth of loans already known to have been given to the party by three millionaire backers - all three later nominated for peerages - in the run-up to last year’s general election.

The Times had revealed further loans totalling up to £4 million, all negotiated by Lord Levy, the former accountant who has become Downing Street's fundraiser. The party could not say last night whether the lenders were in line for peerages or knighthoods.

The Labour spokesman said today: "The Labour Party has received £13,950,000 in commercial loans from individuals. These loans were taken out in full compliance with the rules of the Political Parties, Elections and Referendums Act.

"As set out in our statement yesterday, the National Executive Committee officers will next week propose that all future commercial loans agreed by the party be declared publicly, including their sources. The loans will be recorded in our annual accounts 2006 (covering January to December 2005) in the usual way. These accounts will be published in June."

Despite the Prime Minister's attempts yesterday to douse the cash-for-peerages row by proposing reforms of both the honours system and the rules on party donations, today's announcement will inevitably raise questions about where Labour is getting its money and when - or how - it intends to pay it back.

The row over the loans erupted on Wednesday when Jack Dromey, a union leader who is the Labour Party treasurer, launched an internal inquiry after revealing he had not been informed about the money. Mr Dromey accused Downing Street of keeping Labour's elected officials "in the dark".

Mr Blair confirmed yesterday that he had been aware that the party was borrowing large sums from individual supporters. But he said he did not inform the House of Lords Appointments Commission about the money when he nominated three of those involved for peerages last year.

Unlike gifts, loans at commercial rates of interest do not have to be declared to the Electoral Commission for publication in its quarterly register of donations to parties. The Commission moved yesterday to close this loophole, urging parties to declare their loans.

Patricia Hewitt, the Health Secretary, today dismissed as "outrageous" the allegation that Labour was selling seats in the House of Lords.

"Nothing illegal has been done," Ms Hewitt told the BBC Radio 4 Today programme. "I think it has been unwise to have loans that - although they were perfectly legal and although nothing wrong has been done in terms of these allegations about peerages for loans and all the rest of it - nonetheless gives rise to suspicion.

"I think the Prime Minister dealt with this very clearly yesterday when he said not only are we going to bring forward further proposals for reforms of the House of Lords, but we will also, with the other political parties and an independent body, look at how we make even further steps to ensure proper transparency in party political funding."

Ms Hewitt added: "Quite clearly, we have got to do something about the business of loans. Of course they are not transparent."

Mr Dromey's wife, the Constitutional Affairs Minister Harriet Harman, announced yesterday that she was relinquishing her ministerial responsibility for electoral administration and House of Lords Reform to avoid a conflict of interest.

Downing Street announced today, however, that it was appointing a retired Whitehall mandarin, Sir Hayden Phillips, to carry out a rapid review of party funding in liaison with the major parties.

Two years ago, Sir Hayden, then Permanent Secretary at the Department for Constitutional Affairs, carried out a review of the honours system which rejected MPs' calls for an independent commission to award all honours.

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