David Abrahams, the wealthy businessman at the centre of the political storm over illegal donations to the Labour Party, is unlikely to receive his money back, despite Gordon Brown’s insistence last week that it would be returned.

The donations, channelled to Labour via third parties and totalling almost £700,000, is instead likely to be paid into government reserves, according to sources at the Electoral Commission.

Officials have expressed doubts over whether it is appropriate to return unlawful gifts to the donor, who could easily give it back to the Labour Party under his own name.

The Times has learnt that the regulator is examining whether it should instead be surrendered to the Treasury’s Consolidated Fund.

News that the money cannot be handed back is another political headache for Mr Brown, who attempted to forestall the mounting scandal last week by pledging to return the donations, which he accepted were illegal.

At Prime Minister's Question Time today, Mr Brown struggled to defend himself against a savage attack from David Cameron, who accused him of failing to restore trust in government as he had promised upon becoming Prime Minister.

Claiming Mr Brown's government was "falling apart," Mr Cameron told him: “It took Tony Blair 10 years before confidence in his administration collapsed. You’ve managed it in six months.”

The Conservative leader also revealed that Lord Whitty's internal inquiry into the 'donorgate' scandal ordered by Mr Brown last week had already been partially suspended, though the Prime Minister insisted this was because conducting interviews now would conflict with the ongoing police inquiry.

Mr Brown is already grappling with further revelations of illegal donations from Mr Abrahams to Peter Hain, the Work and Pensions Secretary, and claims from Scottish Labour Leader Wendy Alexander that she challenged the legality of an overseas donation now under investigation.

Now he is also under pressure to explain the confusion over the repayment of Mr Abrahams' £663,975, which has seen Labour ministers seemingly at odds with officials over the money's whereabouts.

James Purnell, the Culture Secretary, suggested during a BBC interview on Sunday that the money had actually already been repaid.

Yesterday, however, Jack Straw, the Justice Secretary, admitted to the Commons that he did not know if it had even left Labour Party coffers.

Questioned as to whether the money had left Labour accounts and where it was now, Mr Straw said: “I cannot answer that question. I don’t know, is the answer.”

His response drew an angry reaction from the Conservatives and Scottish National Party. Outside the Commons, Chris Grayling, Shadow Work and Pensions Secretary, said: “James Purnell and Gordon Brown have a lot of explaining to do.

“The Government is all over the place. People no longer know what to believe when senior ministers talk about this increasingly murky affair.”

Now it appears that Labour is still holding the donations. A party official told Times Online today that the money would remain with the party until the Electoral Commission had decided what should be done with it.

Under electoral law, donations either have to be returned to the donor within 30 days or paid into the Treasury's Consolidated Fund.

Angus MacNeil, the Scottish National Party MP whose complaint prompted the cash-for-honours inquiry, said he was astonished by the mix-up.

He said: “Gordon Brown clearly said the cash would be repaid but a week later it seems the money’s still in the biscuit tin under the Labour leader’s mattress.

“Labour must get their house in order."

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