Rod Aldridge has stepped down today as the executive chairman of Capita Group plc, Britain's largest outsourcing company, after it emerged this week that he had lent £1 million to the Labour Party.

In a resignation statement issued this morning, Mr Aldridge said that as founder and chairman of the business services group, which has won more than £1 billion in public service contracts in recent years, he had always tried to ensure that the group operated with total integrity.

"At present, the Group's reputation is being questioned because of my personal decision to lend money to the Labour Party," said Mr Aldridge.

"As I have made clear, this was entirely my own decision as an individual, made in good faith as a long standing supporter of the party.

"There have been suggestions that this loan has resulted in the group being awarded government contracts. This is entirely spurious.

"Whilst anyone who is associated with the public procurement process would understand that this view has no credibility, I do not want this misconception to continue, as I remain passionate about the group's wellbeing."

Mr Aldridge was named by the Labour Party as one of 12 business leaders who lent a total of nearly £14 million to the party last year, underwriting its £17.5 million general election campaign. Four of the lenders - although not Mr Aldridge - were later nominated for peerages. Their nominations were blocked by the House of Lords Appointment Commission.

Gordon Brown told BBC Radio 4’s Today programme that he was not aware of Mr Aldridge’s decision to step down, but said it was wrong for individuals who support political parties financially to be "impugned" for doing so.

The Chancellor also made it clear that he was committed to a thorough-going overhaul of the rules for the funding of political parties to prevent a repeat of the current controversy over Labour’s loans.

"We have got to do more and I am committed to putting a new system in place, because people must know that decisions are made that are above board and seen to be above board," he said.

Mr Brown distanced himself from Labour's two fundraising arms, one led by the party treasurer, Jack Dromey, and the other run from Downing Street by Tony Blair's personal fundraiser, Lord Levy, saying that, as Chancellor, he thought it inappropriate to seek funds for the party.

But he accepted that the scandal, and the recent furore surrounding the personal finances of Tessa Jowell, the Culture Secretary, had shaken public confidence and that both the ministerial code of conduct and the MPs’ register of interests needed updating.

Times Recommends

• He stole my son, now I’m alone in hell
• Back on the air, but don’t mention Mugabe
• Ten kitchen gadget gift ideas